Guest Author - Emily Wilska
I'm willing to bet that getting started on your 2008 taxes is not the #1 item the list of things you'd like to do in mid-January. But I'm even more willing to bet that it'll be an even less appealing option in early April, when the days are longer and the weather more spring-like, beckoning you outside to do something--anything!--that's not related to sorting papers.
Yes, it's probably too early to actually file your taxes, as you'll need to wait a while for your tax forms to reach you and for late-2008 transactions to clear so you can take account of them. But it's a great time to get last year's financial files in order and to get a handle on things like expenses and donations so that, by the time April rolls around, you're not scrambling to get things done. Here are a few relatively simple tasks to tackle throughout the rest of the month.
Gather Financial Statements from 2008
Depending on how you do and file your taxes (on your own, with a CPA, online, on paper), you'll have different needs for the amount of supporting documentation required to get your returns ready and sent off to the taxing authorities. But taking the time to gather any and all of the records you think you might need will make it easier to refer to them when it comes time to complete your return, or to archive or shred them if you don't need them.
If you have your account statements filed (or piled, or otherwise grouped) by year, simply pull out everything from 2008. If your records aren't yet organized, you may need to do some preliminary work (like opening envelopes and dividing 2008 from other years) before gathering stuff together.
Create an Overall 2008 File
Once you've mined your files for records from 2008, create a file for them. I like to use a closed-side, expandable file folder or an accordion file to corral this stuff; these folders can handle hefty chunks of paper and help ensure that small things like receipts don't get lost. As you gather additional papers over the coming weeks, and as tax-related forms start to arrive in the mail, simply add them to your file so everything you need will be in one spot.
First things first: the old shoebox full of receipts, it must be said, is much better than no receipts at all, and also better than multiple plastic grocery bags full of crumpled, half-legible receipts (which I've helped several clients go through). But still, unless those receipts are already accounted for somewhere else--on a spreadsheet, say, or in an account program--chances are you (or someone you pay or cajole) will need to go through and organize them before they'll be of much use to you.
Are your receipts in bags, boxes, pockets, drawers, glove compartments, and elsewhere? Use the next few weeks to start to extricate them and, if nothing else, get them into envelopes or a box. If you're starting with the shoebox, grab a handful of receipts at a time and sort them into envelopes labeled by month or with the expense categories you use on your taxes (Education, Medical, House Expenses, etc.).
Truly, truly hate dealing with receipts? You're not alone. Find someone who's willing to tackle them for you, either for pay or for trade. Several CPAs I know tell me that they won't actually sort through boxes of receipts for their clients, especially as tax season draws closer, as it's just not an efficient use of their time. Even if your CPA offers this service, chances are you'll pay a good chunk for it. Save yourself some cash and your tax preparer some agony by finding a way to get your receipts sorted before you hand them over.
Start planning now for what you'll do with the extra time you'll have in April, when others around you will be scrambling to get tax work done. An hour or two of tax prep this month can save you several more--not to mention great piles of stress--a few months down the line.