Girlawhirl always pulls together all of her I-had-better-not-lose-these-because-I-need-them-for-taxes documents at this time every year. She tries to be organized with these kinds of things. Even if her desktop is awash with papers, there's bound to be a folder designated for all the year end forms she's been getting in the mail throughout the month of January. But the first week of February is usually the big week—when her W2 arrives and all the other stragglers end up in her mailbox…
Here's a quick list of the types of forms she needs for tax preparation that Girlawhirl keeps her eye out for:
• W2's, 1099's, K1's and all the other income statement forms she receives, including interest earned
• If Girlawhirl had a mortgage (in her city renting is all she can afford!), she'd keep her year end statement that showed how much of her payments went to interest--and her property tax records as well
• Statements from her brokerage accounts
• Bank statements and check stubs, just in case
• And what is usually Girlawhirl's biggest folder, receipts. Girlawhirl likes to itemize her deductions, but most of her Super Pals just go with the standard deduction. If you have a home office, or are an independent salesperson, it pays to save receipts throughout the year for business related expenses
Girlawhirl also tries to be consistent about some other things that can help lower her tax bill every year:
• She's always donating things, household items, clothes that she can't trade with her Super Pals, and even her old computer. Of course she's diligent about getting receipts, and keeping them in a safe place!
• She maxes out all of her retirement contribution options. When her contribution is taken out of her paycheck, she never knows it gone, and it's subtracted from her salary so she's deferring her tax liability. She's got an IRA as well. Her financial guru, Hilda Frost, weighed the pros and cons of a ROTH IRA vs. a traditional one, and came up with the best plan for Girlawhirl.
• And, again, if she had a mortgage, she would make January's payment early, so the check clears in December. That's an extra month of interest that could be deducted!
With a little forethought and some organizational strategies that keep all those receipts in order throughout the year, Girlawhirl finds that she's able to get her year end financial information in order pretty quickly. And she no longer fears or avoids calls from her accountant, because more often than not, it's good news for her!
Go Get It!
Hilda Frost, who is an investment advisor, not an accountant, can be reached at:
212 883 8566