Thursday, February 19, 2009

Tackling Our Tax Returns


Today I'm taking the plunge and tackling our tax returns. I have a rare day in which I don't have any commitments and the kids are off at school, so it's the perfect day to tackle our tax returns. The peace and quiet of being alone in the house ensures that my head won't explode in the process.

Yes, I know, what a boring subject to post about. Yes, yes, I agree. However, I have a purpose with this post. I want to share with you how I stay organized all year to make this dreaded day more bearable.

Before I do that though, I want to gush over the invention of tax preparation software. Gone are the days of trekking to the post office or the library for more forms after screwing up the one set of forms sent to us by the IRS. Gone are the days of reading incomprehensible gobbledy goop trying to figure out which number goes where. Enter tax software. Yippee!

Hey, I'm sorry, this is the kind of thing that floats my boat, okay. I'm trying to make this less painful is all.

So, the software that I have been using for the past several years is H&R Block's Tax Cut. I used to use Turbo Tax, but they kept raising their prices, their customer service stank, and they started charging for state returns and e-filing. I made the switch to Tax Cut because the state return is included free as a download, and the cost of one federal e-file is included, plus the software itself is cheaper. The e-filing is usually around $15, so with the cost of the software and one of the e-files included, you can see why I made the switch. I don't mean to diss Turbo Tax, it's a great software and all that, I just don't want to pay more for the same thing. It's not like it's ribbon or something. Come on.


This is my method for staying organized year-long for tax preparation. It's just a three ring binder, and it's nothing pretty, just a view binder with the tax year on the cover and spine, and file pocket dividers inside. Sure, I could make it pretty, but let's be real here, it's going to hold tax returns. Blech.

I have eight binders in all. Seven binders are for holding tax returns and documentation for years past (the recommended length of time for keeping these papers), and one for the current year's accumulation. When I've finished preparing tax returns for a given year, I take the oldest binder out, shred the tax returns and accompanying paper bits inside, and then I begin the new year's accumulation with the dividers already set-up and ready to go. All I have to do is change the tax year on the cover and the spine.


I store these binders in my file cabinet because that's where I have space for them and I keep it locked. The big stack of papers between the binders are customer receipts for my Creative Memories business. I didn't want to make bigger binders for these because this stuff doesn't need to be as accessible as what's inside the binders. I would only need to access these papers if I were audited. [Shudder]


Here's what my pocket dividers look like. I typed the labels based on what our tax returns have looked like in the past. The first pocket divider is always for income--pay stubs, W-2s, 1099s, pimping my plasma, etc.


My deductions divider has a bit more, but I don't necessarily use all these categories every year. It's more of an overview to jog my memory. If you want to make dividers for your binders, I would suggest going down your 1040 form line by line and pulling categories from it based on the lines you have filled out in years past.


I have a section for Schedule C because that's where I keep documents related to my business. This needs to be reported on a separate form, so it needs a separate section.

So, I have all these sections in my binders, and as the year goes on and related items come in, I file them into my binder for the current year so that at the end of the year I don't have the whole gathering-of-the-paperwork-nightmare to deal with. It's all there in the binder already.

If you have someone else prepare your taxes for you, getting organized like this can save you loads of money. Trust me. Once upon a time, I had a little side business in which I did bookkeeping for small businesses and tax return preparation. The first year with a client was always a head exploding experience, getting them all set up with so many scraps of paper all stuffed into a shoe box. People really do store important papers like that.

So, I hope this helps some of you to get more organized and make the process a little less stressful. And if you're one of the shoe box people, May the Force Be With You. Happy Tax Season!

For more Tackle It Tuesday fun, check out 5 Minutes for Mom.

21 comments:

  1. Neighbor, I need you more than evah today.....I am in the middle of the gathering-of-the-paperwork nightmare....and it's not a shoebox, it's a lovely decorated picture box. So I can't be ALL that bad can I???? Oh, I do HATE this aspect of having a home business...ya know the real BUSINESS part....blech.
    Hope your taxes are done by now and you're eating bon bons.....or celery.

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  2. Ugh...taxes!!! Nothing funner! Love some of your organizing tips...will definatly be implementing a few for myself.

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  3. If you were audited (heaven forbid) I think your auditor would love you... no sorting through boxes of reciepts! Brilliant. You have inspired me.
    Ps I just recently found your blog and I love it!

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  4. There you go being anal again.... (But I might switch my tax file organization from the current manila folder method to a binder method likes yours. Thanks for the idea!)

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  5. That is an excellent system!! You know I love the binder thing and it is so much better than how I am keeping things now. I am book marking this page!

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  6. Only you Jill, would get warm and fuzzy over tax software! I just paid H&R an arm and a leg to do mine, I'm such a sucker!

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  7. p.s. I happen to LOVE shoe boxes....hmmmph!

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  8. Wow..your binders are amazing...you motivate me to do something like that!
    Our accountant would be happy:)!
    -sandy toe

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  9. We do something similar, although not near as tidy. I am forwarding your post to my hubby. Thankfully, ours are done for the year (he's like that) but maybe the idea can ferment in his mind over the year. :)

    I do have a tip if you are like me and donate unneeded goodies to charities, etc (my Mom worked for Goodwill as their comptroller for years, so I grew up giving to Goodwill). I take a picture of the pile of stuff and put that photo into a file in my computer by year. Then I print out a copy (just on paper, it's just a reminder) and attach it to the receipt we get.

    Just my little tip that has worked for us for many years.

    I do love those folders. I wonder if I went back and did that if hubby would lose his mind? :)

    Cheers, Kiy

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  10. i've actually been panicking a little about our taxes b/c this year I think our returns are complicated. in years past, living in military housing, we've just had w2s, bank interest, and student loan interest. now we own a home, sold some stocks, moved, and I have no idea what all I need to take with me to get my taxes done.

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  11. I just linked to your blog from another one and saw your post about tax software. I am a person who loves tax software too ... it is so much fun for some reason! I am not as organized as you are though. Good tips!

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  12. Oh gosh....why can't you be my neighbor and help keep me organized???????!!?? We pay a fortune to get our taxes done and I'm not sure why. Maybe with one of the computer programs we could do it ourselves...scary!!

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  13. You are the most organized person I know. Wow! I've been putting off doing our taxes too. It's so draining although tax software does make it less painful.

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  14. You are PASSIONATE! I am impressed...but I would be happy if we managed to get the shoe box concept down.

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  15. YOU..my friend...are THE most organized person I KNOW! What di I have to do to get you to come to my house???? I need some skillz!

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  16. super organized! jeeZe! So i dont see how you say sometimes that things are not organized cause you organize everything! lol.
    making that program switch was smart, saving that $$$

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  17. I have a question for you! I hope are able to answer for me. What do you do with all of the monthly statements. I LOVE this idea! In order for me to do this I will have to reorganize my file drawer. Which currently is organized by company not yearly (w/ the exception of taxes). I look forward to hearing from you.

    ~Aimee

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  18. Aimee (3busybs), You didn't leave an e-mail address for me to contact you, so I'm just responding here in hopes that you will come back to check. I'm assuming that you're talking about bank statements. I also keep those in the binder with the respective tax year. Anything that I might have to refer to in an audit goes in there. I punch holes in the statements and stick them all together behind the pocket folders. I hope this helps.

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  19. oops! Yes, I am talking about those too. But also the gas, phone, electric etc....

    braukmans@peak.org is my address.

    Thank so much
    ~Aimee

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  20. I have boxes for each year - complete with bills, old checks, you name it. A binder for taxes and such, though, is SUCH a smart idea! I just created a binder for bills for this year and thought about doing it for all the other years to free myself of those boxes. I'm liking what you did A LOT!

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  21. Looks very organized! I only have a small 2 pocket folder that I keep my tax info in. I don't have much to turn in each year! I love binders though... I find a reason to buy them and store things in them as often as possible! lol

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