Tuesday, February 28, 2012

How I Organize Tax Time

I've been meaning to post details of my Owl Baby Shower, but seems like there is always something going on in the Little Muon household.  I am recouping from a small bout of the stomach bug and just learned that I have a severe Vitamin D deficiency.  The doctor wrote a script for me, so hopefully, the extreme fatigue I've been feeling lately will get better soon!

Since it's tax time, I thought it would be a great opportunity to talk about how I organize for this dreaded time of year, so the shower details will wait so that I can bring you some tax time organizing tips.  I'm not sure why I dread tax time so much, probably the anticipation of how much I'm going to owe or get back.  Luckily, I stay pretty organize with my paperwork, so all I have to do is force myself to sit down and actually do it.

Back in March 2011, I followed along with Jen at IHeartOrganizing to build a Household Binder.  Organizing with binders wasn't new for me.  I already had a binder system in place for my bills and taxes.  Here's my current binder system:

The unnamed one is for Little Man.  I just haven't had a chance to print out the label yet.  Are you wondering where my Household Binder is?  Well, it's in my kitchen for fast and easy accessibility.  These particular binders (shown above) are located in my office in the basement.

Before going to the binder system for my taxes, I used to keep a large envelope tacked to my corkboard and shoved any related tax documents in there.  Then after my taxes were done for that year, I'd file them away in a hanging folder in my filing cabinet.  This worked out fine, but when I read this post from Jill at Controlling My Chaos, the binder system was born.  The only difference between mine and Jill's system is that she uses a binder for each tax year; whereas I use only one consolidated binder for all my tax documents.

For the cover, I just used scrapbook paper and stickers.  Nothing fancy.  I'm sure I could make it fancier, but I didn't want to spend too much time on it.  It's taxes after all!  *Sorry for the bad picture.  There are no windows in my basement office and the glare from the binder gave me a hard time.*

I used 7 pocket folders to hold tax returns and documentation for the past 7 years (the IRS recommends to keep 7 years worth).  The 8th folder is for the current year's accumulation of docs.

My folders didn't have tabs, but I found these pocket dividers with tabs which would be great to mark each year.  Within each year, the documents are separated and categorized by "Income" or "Deductions".

I created these in a Word document and printed them out; one set for each year.  I then staple the pile together.  Here's the break down:

Pay Stubs

Schedule A - Itemized Deductions
Mortgage Interest
Property Taxes
Auto Registration
Interests from School Loans
HSA Account

Auto Registration
Charitable Contributions
Job Expenses
Out of Pocket Medical Expenses
Misc. Deductions

I don't have business expenses that relate to running a business, but if you do, you could create an additional page for Schedule C since these are reported on a separate form.  

My favorite tax software is Turbo Tax.  You can do it all online and it walks you step by step thru the process.  It even does an audit check at the end and scores your risk of being audited by the IRS.  

Because I have this binder, I can find and reference the required documents easily and quickly.  I love that!  When it's time to do taxes, I pull my tax binder out, put some tunes on from I Heart Radio, and enjoy a cup of joe from Dunkin Donuts.  

Music and caffeine are not required, they just make the process of doing taxes more enjoyable.

So, are you ready for tax time?


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