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Blog: Minimizing Financial Clutter
 How to Drive Your Accountant Crazy at Tax Time: #1
It's probably started already. Your mailbox, recently filled with catalogs and holiday cards, is now filled with W-2s, 1099s, and income tax forms. In 93 short days, your 2007 income tax returns will be due.
I recently asked my accountant, Marc Asher, of Asher and Simons, P.A. in Baltimore (www.asher-simons.com) for a list of things that clients do at tax time that make it more difficult to prepare his clients' tax returns. (Hopefully he wasn't talking about me!)
Insanity-Provoking Practice #1:
Not providing the cost basis for taxable stock sales
If you sold stock last year, you will receive a Form 1099 that indicates the price at which you sold the stock. Form 1099 does not, however, indicate the per-share price you paid when you purchased that stock. This is called the cost basis. You need to know the original purchase price of the shares you sold in order to calculate your gain or loss on the sale of the stock.
You can locate the cost basis of your stock in one of three ways:
- Locate the Purchase Confirmation form you received when you purchased the stock. That document will show you the date of purchase, the number of shares, and the purchase price per share.
- Look at your monthly investment statements (those big envelopes of forms you receive every month). The purchase price of your stock will be listed on the statement for the month in which you originally purchased the stock. Yes, that means that you will either have to remember when it was that you purchased the stock or look through many, many months' worth of statements trying to locate the information. Ugghh. But remember, the reason we kept those reports in our files was to eventually retrieve them…
- Contact your stockbroker and ask him or her to provide you with the cost basis.
Your New Year's Resolution for Organizing Investment Statements
The beginning of 2008 is a perfect time to make sure that, in the future, you will be able to easily retrieve cost basis information for your investments at tax time. Some suggestions for setting up an organizing system:
- Your monthly or quarterly investment statements frequently arrive already 3-hole punched. Set up a 3-ring binder for each investment, and store the monthly statements in it in reverse chronological order. (The most recent statement goes in the front of the binder.) When you sell a stock, pull the monthly statement from the month in which you purchased the stock and put it in your tax file for the year in which you sold the stock.
- Keep a separate file folder or binder for Purchase Confirmation and Sale Confirmation forms for each investment. This is especially critical if you have chosen not to receive paper copies of the monthly statements. If you have a minimal amount of space for files, the purchase and sale confirmation forms are the most important forms to keep.
- When you sell a stock, pull the Purchase Confirmation form out of the investment file and place it, along with the Sale Confirmation form, in your tax file for the year in which you sold the stock.
Next Week: Your Appointment With Your Accountant (I forget … when is that??)
posted on: 1/13/2008 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.
Katherine's Website:
www.absolutely-organized.com
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