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Blog: Minimizing Financial Clutter
Tax Organization in 5-1/2 Easy Steps

Only one month left until Tax Day 2009 For many of us, preparing our income tax returns or even gathering the documents and giving them to someone else to prepare is the most postponed of all our household tasks.  We know it's important, but we procrastinate until the last minute (or even beyond the last minute) to get started.  If that is true for you this year, read on.
I am NOT an accountant, and I'm not giving you tax advice.  I am a professional organizer and daily money manager, however, and I have helped many of my clients do what I'm about to explain here.  So, sharpen your pencils and prepare to be rid of this dreaded chore for another year!
Step #1:  Gather your supplies
You will need the following things:
         Your 2008 Federal tax return
         Your 2009 tax statements (W-2s, 1099s, etc.)
         2009 bank statements, cancelled checks, credit card statements, and cash receipts for deductible expenses
         A large mailing envelope
         Lined paper and a pencil, or a computer with a spreadsheet program, such as Excel.
Unless your circumstances have changed drastically, the types of information on last year's tax return will be the same types of information you'll need for this year's return.
Step #2:  List your sources of income
Using last year's tax return, make a list of all sources of your income (wages, interest, dividends, rental income, consulting income, etc.).  If you see that something has changed from 2008 (for example, if you changed banks), write the name of the new source of income.
Step #3:  Gather your tax statements
Locate the 2009 year-end tax statements that reflect your 2009 income from all of the sources you listed in Step 2.  This is the most important thing you need to do regarding your taxes:  Make sure you report all of your income.  The IRS will get very upset with you, and will charge you lots of money in interest and penalties if you don't report all of your income. If you think that not reporting a tax deduction is bad, it is nothing compared to not reporting taxable income.  When you find your tax statements, put the statements in the large envelope. 
Step #4:  List your (possibly) deductible expenses
Looking at last year's tax return, make a list of the types of expenses you deducted from your income last year.  For example, your deductions might have included such things as charitable donations, medical expenses, business expenses, and tax preparation fees.  If you incurred new potentially deductible expenses in 2009, include those categories on your list, too.  (If they are not deductible, your accountant will tell you.)
Step #5:  Categorize and total your (possibly) deductible expenses
Scan your bank statements, one by one, and highlight any possibly deductible expenses.  Do the same for each of your credit card statements.  Next, create a spreadsheet of those expenses, listed according to the categories you identified in Step #4.  After you have entered all of the highlighted transactions from your bank and credit card statements, pull out any paper receipts for your possibly deductible expenses.  If you paid cash for any of those expenses, you will need to add those purchases to your spreadsheet.  Total your expenses for each category and print your spreadsheet.  Put the spreadsheet in the large envelope.
Step #5-1/2:  Give the large envelope containing your tax statements and spreadsheet to your accountant!
For most of us, organizing our tax documents really is this simple!  So go ahead and get started.  I guarantee that you will feel a great sense of relief when you have finished.  And why wait until April 15 to get that great feeling?

posted on: 3/14/2010 11:30:00 AM by Katherine Trezise
category: Finances

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Minimizing Financial Clutter

by Katherine Trezise

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About Katherine:

Katherine Trezise is president of Absolutely Organized, based in Baltimore, MD. She is president-elect of the National Study Group on Chronic Disorganization. Katherine holds a masters degree in business administration, is a Certified Professional Organizer® and a Certified Professional Organizer in Chronic Disorganization®. Absolutely Organized specializes in helping people organize their homes, paperwork and financial records to make room in their lives for the things, people and activities that are most important to them.

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