How to make tax time easier: 8 steps to get you started

by Jenni Prokopy, the Editrix

1040 Taxes suck. I mean, the part about them funding services we need—like police and firefighters, social security and health care for kids—that's good. It's doing tax paperwork that sucks.

In years past, I've rushed around collecting scattered documents, trying to find receipts, and pulling everything into piles I then took days to decipher. For a Babe like me with anxiety and fibromyalgia, it would always be a bad health time. In fact, I had to block off three or four days at least to get everything done.

But I've been getting into a rhythm with my paperwork, I hired an accountant, and I've found some other tips that really help. So without further ado, here are my favorite time- and energy-saving strategies for getting your taxes done.

1. Banish procrastination

Seriously. It doesn't help you or anyone else around you. Sure, it's cool to get on the news on April 15 as you wander up to the post office with thousands of your neighbors. But there are way cooler ways to get on TV, and besides, the sooner you finish your tax return, the faster you'll get a refund...or at least the satisfaction of being finished.

Procrastination frequently leads to guilt, and you may already be feeling guilty about not understanding everything involved in paying taxes. So let's not go there, OK? You have better things to do.

2. Keep tax-related records year-round

Don't wait until the end of the year to tackle a shoebox full of receipts. Start getting organized now so all your paperwork is in order at tax time. A few pointers:

Buy an accordion file or some other separate filing solution (as long as it's not a grocery bag) in which to store your tax-related paperwork.
Keep that accordion file organized by category so it's easy to file and find the paperwork you need.
When paperwork comes in that you think is tax-related, file it instantly. Pay your property taxes? File the receipt. Vis it the doctor? File the receipt. Don't let them pile up with other paperwork; you'll forget to file the m in the tax folder, believe me.

3. Create a spreadsheet or some other method of tracking your medical expenses

I use excel, and my spreadsheet includes these categories:

Date of service
Type of service (doctor, dentist, specialist, prescription, procedure)
My out-of-pocket cost
Method and date of payment (HSA, cash, check, credit card)
Ancillary expenses (parking, gym membership, etc.)

Each time I have an appointment or pay a bill, I make a note of it in the spreadsheet, which also adds up my total expenses. Then I'm able to give this spreadsheet to my accountant and she knows exactly what I can deduct. (It also helps me plan for the next year, showing me how much money to put into an HSA based on previous spending.) If you're doing your taxes yourself or with software, this will help you, too.

4. Consider using software to help prepare your taxes

I used TurboTax for years and loved it. You follow a simple questionnaire and input your info along the way, and blammo...you're done. The only catch is that you must have your paperwork organized and at-hand. (See tips #2 and #3.) You can even e-file immediately and have your refund directly deposited to your bank account.

5. Consider getting an accountant/financial advisor

When I started my own business, I knew getting an accountant was a must. Keeping track of my paperwork isn't that hard now that I have a system, but I didn't want to make any big mistakes on what quickly became a much more complicated return. And now I LOVE my accountant!

It's only a few hundred bucks a year to retain her, and she's totally worth it when I consider the days I used to slave away over paperwork. She gives me a booklet of questions to answer; I complete that and send it to her along with supplementary receipts and statements, and we're good to go.

A good accountant will:

Get to know you personally, learning your priorities and issues as they pertain to your taxes (like owning your business, having huge medical expenses, buying or selling property, raising kids, etc.)
Help you organize your paperwork (including telling you what to save and for how long)
Guide you toward decisions that save you money in the short- and long-term (like putting money into a Roth IRA or making a charitable donation)
Explain anything that's confusing and take the reins in completing and filing your tax return
Reduce the time you spend on tax prep and ease your anxiety or fears

Having an accountant has completely changed how I view tax time. I know that I have a couple hours of work to do, and then she handles all the tricky details. It's a massive relief, a huge time-saver, and a confidence booster because I know my taxes are done right. I have too much stuff on my mind to be worrying about tax paperwork.

6. Enlist help

pile o' paperwork If you feel overwhelmed with the idea of getting your paperwork organized, enlist the help of a friend or family member. They can sort through everything with you, get it organized into a filing system (which you'll keep using, right?), and then you'll be ready for next year!

If you can't afford an accountant, go for the software. (By the way, you may be able to write off the cost of tools or services you use to do your taxes.) If you can't afford the software, see if you can barter with an accountant you know. Or look for accounting or law firms in your area that offer assistance...plenty of firms do. (For example, my pal Jeff volunteers with a city program that helps low-income folks file their taxes at no cost.)

So you don't understand it all and you need help. So what? There's nothing to be ashamed of. Please don't waste hours of time and energy struggling when you can get help.

7. Donate to charity

Because it's a good thing to do. And it's a write-off!

8. Make a checklist you use each year

I have a heap of things I need to collect for my accountant each year, and without my checklist I would forget a bunch of them. Here are just a few things I keep track of (I just love checking them off the list as they arrive or are generated!):

statements from the bank about interest earned
1099s for freelance work
receipts for charitable donations (the IRS requires written acknowledgment from each recipient)
W-2
statement from mortgage company on how much interest we paid
brokerage statement that shows all activity for the year
property tax bills
utility bill summaries
medical expense log
401k end-of-year statement
insurance company paperwork showing what we paid into our health savings account (HSA)

Because I have a list to track, I know what I'm missing—and who I need to pester so I have all my info in time. As long as I have all the stuff on my list, I know I can complete my tax prep. Then I use the checklist again next year, making modifications as necessary.

You have the ability to make tax time much easier!

Because I watched friends and family lament tax time for years, I always thought it had to be this humongous chore, and for years I struggled and made mistakes. When I finally reached out for help and put a few organizational systems in place, I realized taxes don't have to be a scary, stressful task. I hope these tips get you on the path toward that feeling, too! Let me know if you have tips to add and we'll post them here.

p.s. I am not an accountant, so please don't take all this as gospel and sue me if you get audited. I'm just a Babe with some suggestions. Got it?

Posted: 3/17/2008 in Coping

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