Get Ready for Tax Time... in October?

“What? Laura, you’ve got to be kidding! You want me to start thinking about tax time in October? Halloween hasn’t even passed yet.”

That’s precisely the reason. Once my kids’ third favorite holiday is over at the end of this month, all minds will be focused on the holiday season. Thanksgiving will come and go, then the Christmas/Hanukkah/Kwanza season will go by in a flash, and then it will be the New Year. Once again, you’ll be stressed out and scrambling trying to get everything pulled together. Why not start getting organized for tax time now, before the flurry of wrapping paper hits? By putting yourself in tax mode nice and early, you can DRAMATICALLY reduce the amount of stress in your life down the road.

Imagine kicking back with your refund already in hand (yes, the early bird will beat the rush with the IRS) while all the procrastinators out there are still scrambling to dig up old receipts and complete IRS forms. The closer we get to that April deadline, the less likely we are to take the time and care to stay organized and do the job right. If you let yourself get stressed and rushed, you’ll end up in survival mode, just trying to make it through another tax year.

So, with lots of time between now and April, let’s make this the year to get caught up, straightened out, and financially organized once and for all. You can get a head start on the process, even before year-end.

Begin by getting your files organized. I recommend a five-step process, which I call my “5-P System”:

1. Purge: get rid of outdated information
2. Plan: map out your new system
3. Place: get everything set up
4. Put: file in the appropriate place
5. Purchase: hire out what you can’t do

Here’s how to use it:
1. Purge. Throw away or recycle any unnecessary duplicates, outdated draft copies, and otherwise unnecessary materials before they turn into a huge mess and an intimidating chore. When it comes to purging, it is all too easy to keep way too much. Unless you feel like perpetually expanding your office space, adding a room to your home, or continually buying more filing cabinets, here are some guidelines on what you can toss or shred, anxiety-free:

• Airline ticket stubs (once the miles have been applied to your frequent flyer account)
• ATM receipts (once they have cleared your bank)
• Business cards from others (input the data into your contact management software and toss the cards)
• Catalogs you didn’t request (if you want to buy something, you can probably find it online)
• Credit card receipts (once you’ve reconciled your account, toss any that aren’t tax related, needed for a warranty, or might be returned)
• Financial records (anything older than a year should be moved out and stored in archive boxes)
• Greeting cards (those that serve no sentimental purpose or plain-vanilla variety)
• Old calendars with “pretty pictures” (donate to a school or nursing home)
• Old college term papers (how often have you referenced those?)
• Old newspapers (old news!)
• Old warranty manuals (for items you no longer have)
• Outdated policies (if you no longer hold the policy, you don’t need it)
• Stacks of magazines you haven’t touched in years (enough said)

2. Plan. Decide what you need to keep for taxes and have a clear understanding of what needs to be saved (and how long to save it):

• Paycheck stubs (until you are sure your W-2 is correct)
• Bank statements, credit card statements and bills that document deductions (keep for three years)
• Tax returns (keep for six years)
• Warranty info and receipts for big-ticket items (for as long as you own the product)
• Receipts for IRA contributions (keep forever—it’s the government )
• Investment statements (hold until six years after the investment is sold)
• Home improvement receipts (retain as long as you own the house)

3. Place. Start a checklist of things that you’ll want to have on hand when you file your taxes. Some of these (your W-2, for example) won’t be available until after the end of the year, but there are others that you’ve been accumulating throughout the year. Keep a file folder marked “2007 taxes,” where you put all tax-related receipts as you come across or receive them. You might need more (or less) depending on your situation, but here’s a list of some documents that you should set aside after the close of the year:

• W-2s from your employers
• 1099-INT (for interest earned)
• 1099-DIV (for dividends you received)
• 1099-B forms (reflect transactions involving stocks, bonds, etc)
• 1099-MISC forms (for any income from self-employment)
• K-1 forms (if you have a partnership, small business, or trust)
• 1099-SSA (if you receive social security)

Don’t forget about your deductions! Maximize your refund by making sure that you get every deduction you deserve. You’ll definitely want to do some research or consult a professional on this one, but some common deductions include medical receipts, receipts from charitable donations, education receipts, moving expenses, mortgage interest, and childcare costs. One deduction that is often skipped comes from clothing or used-item donations. Whenever you drop something off with the Salvation Army or a similar organization, always get a receipt. The value of the donated items is deductible.

4. Put. Move all old (previous year) tax returns and related receipts and documents to archive files in a safe, out-of-the-way place. I remove all files I want to keep for history (bank statements, credit card statements, charity donations, etc.). Then I put each year’s records in a white cardboard archive box, label it with the year, and store seven years worth of boxes in my basement. In my filing cabinets, I create new hanging files to replace these purged files (if I get audited, I don’t want my paper jumbled together). Keep only current information in your central filing cabinets.

5. Purchase. Once you have all your documentation assembled, get help! Hiring a bookkeeper is essential for me since I own a business, but I know several people who use one to help with all their receipts, statements, and bills. Your bookkeeper can compile a tidy and professional set of files that will make life much easier when you need to access financial records, either for tax time or otherwise.

If you have a semi-complicated life like we do with two working parents, childcare expenses, and investments, it’s definitely worthwhile to have a specialist do your taxes. Add in a few rental properties, a business, and education costs, and it’s a no-brainer to hire an accountant. Frankly, in our family, doing it ourselves is simply not worth the time and brain damage.

Use software. If you use a bookkeeper, he or she will want you to use an accounting software program like QuickBooks or Quicken (non-business version). If you don’t use a bookkeeper or accountant, you should learn to use the software anyway.

Imagine printing checks right to your printer with a few mouse clicks; looking up payments by name, date, amount, or number; balancing your checkbook without doing any math; never forgetting to enter a purchase in your manual bookkeeping system; and having automatic tax reports generated at the end of the year. All this is possible, and more! Take a deep breath, buy the software, install it, and go through the Wizard that pops up when you load it.

Follow this five-step process, and you’ll be on your way in no time. You’ll be so relieved that you’ll never start your taxes after the New Year again!

Make it a productive day! ™

(C) Copyright 2007 Laura Stack. All rights reserved.

This article may be reprinted provided the following credit line is present: “© 2007 Laura Stack. Laura is the president of The Productivity Pro®, Inc. and the bestselling author of Find More Time and Leave the Office Earlier. She presents keynotes and seminars on time management, information overload, and personal productivity. Contact her at 303-471-7401 or www.TheProductivityPro.com.” The link to Laura’s website must be active.

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(Note: this letter from China has been paraphrased and revised slightly to reflect American English.)

Q: Dear Laura,

I am Flora L. from China, a reader of your book Leave the Office Earlier. (Editor’s note: yes, there is a Chinese version.)  It is a good book for reference. My job is in customer service in a testing company. I have to receive calls everyday and answer their inquiries.  I am new to this company and often have to help others in our team.  If they ask me to deal some trifle things, I have to put down the work at hand.  Then the result is that they all can leave the office on time, but I have to work overtime almost every day.  I don't know how to refuse them, because I am new.  I admit that I can learn more from this but am exhausted almost every day. Am I just an inefficient employee?

The second trouble is that when others take vacation, they leave their jobs in my hands to handle, but I don’t know much about their work or how to handle it.  Would you please let me know how I can improve myself in short time?

Thanks and best regards,

Flora

A: Dear Flora,

I hear your frustration and stress and hope I can help.  It’s no fun to go home from work exhausted every day.  There are several things I see here.  You are not necessarily inefficient, but you do need to adjust the way you view your new position.  In customer service, your job IS to be reactive.  You are a problem solver; consequently, much of your time will be uncontrollable.  In your case, answering the phone is not an interruption; it is your job.  If the customers stop calling, and you stop answering their inquiries, your company will go out of business, and you will lose your job.  Never complain about customers wasting your time.  Long term, you must decide whether this type of environment is right for you, versus a position with more discretion on how you spend your time.

Second reality check: if you are being assigned work from a superior, I will assume for purposes of this discussion that he/she has your best interests at heart. All of us must “pay our dues” in any new job to learn the ropes and get the training we need.  It is normal to work longer hours in ANY new position or when starting up a new business; it’s to be expected due to a steep learning curve.  Check to make sure you aren’t falling victim to an entitlement mentality.  However, if six months to a year goes by, and you are still feeling anxious and overworked, it’s time to take another look at things.

Now, if team members are wasting your time, then that is a different issue.  It is unfair for people to take off and leave you in charge of their work without sufficient knowledge and training in that area.  It is unfair for colleagues to take advantage of you and dump their work on you, so they can be lazy and goof off.  From your note, it doesn’t sound like you’ve had any dialogue about these issues when your team members.  As hard as it may be, we always must first communicate directly with the offenders and state clearly what we want and expect.  You need to assert yourself, speak up, openly discuss the issues that are bothering you, and attempt to set some boundaries with these people.  If that fails, you should talk with your manager about these problems and attempt to gain some resolution. 

You must ultimately decide to either put up with it and not complain or walk out and search for something better.  But start by not being so passive and letting people walk all over you.  As my father always said, “Silence implies permission.”  But also remind yourself that often we learn best by doing.  Then decide what you are and aren’t willing to put up with.

Productively yours,

Laura

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