Tax season is upon us, today I gave away four gift cards for TurboTax Deluxe to four of my readers and that got me thinking about my own taxes. How organized are you for your current, and prior, years tax returns. The 1099’s, 1098’s, W2’s and everything else should be trickling in by now and you need to have a system in place to keep track of these extremely important documents. I refinanced this year so I have gotten 3 1098’s for mortgage interest paid, both my wife and I work so that is 2 W2’s, we have IRA’s, 401k’s, blogging income, and kids. All of these things relate to taxes and all of the documents need to be in order and accessible to complete my return.
How I Do It
The system I have developed is a fairly simple hanging file folder with separate manila folders for each tax year. On the outside of the manila folder you should write down each of the interest earning banks, mortgage companies, affiliate marketers, and investment accounts that owe you some type of tax related document. As each document comes in you place it in the folder and check off that you received the document. This way you know what is still outstanding and what has been received. All of your documentation is in one easy to find location and you don’t have to worry about tearing the house apart later to find it or wondering what you still need to file.
Why It is Important
Organization is important for everything you do in life but especially for your taxes. Keeping everything together will make it easy for you to jump online and complete your tax return in no time flat. Once you complete your return everything is easily returned to the file and kept until it is no longer needed. If you came into my home right now and asked me for my 2006 tax return and supporting documentation I could whip it out for you in less than 1 minute, could you do the same thing? The IRS probably isn’t going to wait around for you to reproduce copies of things you should already have so get organized now while you have the time.
Don’t Cheat the System
I know there are people out there who think, hey they didn’t send me a 1099M so I don’t have to claim that income, WRONG! If you earned it you have to claim it, by keeping track of who owes you something you will know what didn’t come in. They don’t actually have to issue you a 1099M if you didn’t earn more than $600 during the year. That doesn’t make you any less accountable for your taxable burden. I made $400 in 2008 as a guide for the text service ChaCha I didn’t get a 1099 but I still claimed the income, my wife didn’t think I should. The fact of the matter is twofold, 1.) it is the honest thing to do don’t cheat the system 2.) if you get audited and the IRS discovers this “unclaimed” income you could be in a world of hurt after interest and fines are assessed. Just do what is right and claim everything you make regardless of if it is documented or not.
Additional Tax Resources
TurboTax TaxCaster (forecast your return)