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Plan Well, Retire Well

Saving and investing your money

Sunday, March 28, 2010

Take the Tedious Out of Taxes

Posted by Kathy Sweedler - Kathy Sweedler Income Taxes Organizing Finances

Do I really think it's possible to make doing taxes less tedious? Well, honestly, no. But, I do think you can look for ways to reward yourself by finding money, clearing paper clutter and organizing your finances for 2010.

The next two weeks will find many people scrambling to finish calculating their taxes! I've made that 11:59 p.m. run to the post office on April 14th before -- have you? Do you need a way to motivate yourself to finish this task? Well, here are three suggestions that just might be the motivation you need!

1) Find Money. When working on your taxes, explore the many tax credits that are available. Finding a tax credit that applies to your financial situation is like finding a treasure chest of money! A tax credit that saves you $300 (for example, on the cost of an energy efficient window) is $300 less taxes you need to pay.

The American Recovery and Reinvestment Act of 2009 created new tax credits and changed eligibility levels on other tax credits. Don't assume that you don't qualify! Check out tax credits available for education, new vehicle, children, as well as others. For a convenient list of tax credits, visit the IRS website's "ARRA Information Center."

Be sure to not miss the earned income tax credit. The (EITC) helps people who work but earn modest incomes. The tax credit you can receive varies depending on your income and the number of children you have. New tax rules have increased the EITC. For example, married filing jointly households earning $48,279 or less with three or more qualifying children may be eligible for a tax credit up to $5,657. Visit the IRS website for more information. If the EITC amount is more than the taxes you owe, then you may receive a cash payment

While looking through your financial paperwork keep an eye out for costs that you don't want. For example, on my credit card summary I found some reoccurring memberships that I had forgotten about as well as a monthly fee for a service I don't recall signing up for! Cancelling these services will save me money in 2010.

2) Throw Away Paper Clutter. A rewarding aspect of preparing taxes is being able to throw away many of the papers that have accumulated over the year! Save things that:

  • prove what was done (for example, job contracts),
  • remind you of what you have (receipts for large purchases), and
  • protect your assets (mortgage paperwork and statements from mutual funds, banks, etc.)

Throw out those records that have expired, been replaced, and are no longer important to you. For example, if an annual statement from a mutual fund contains all the information that was originally sent to you quarterly, discard the quarterly statements.

Keep a copy of your income tax returns and supporting documents for at least six years. You may need even older tax records if you own a home, have a non-deductible IRA contribution, or you have business or rental property that depreciates over a number of years. For more information, check the IRS Publication 552, Recordkeeping for Individuals.

3) Organize Your Finances for 2010. Set-up a filing system that works for you. At a minimum, designate a folder called "Current Year Taxes" for papers (or electronic files) that will help you prepare your 2010 taxes. For more information about organizing your financial papers, visit University of Illinois Extension's website, "Dealing with Clutter."

Taking these steps may not make paying taxes fun, but at least it will put a positive spin on the activity. See how much money you can save and just how much you can add to your recycle bin while completing your tax forms this year.

How do you take the tedious out of taxes? Send me your suggestions by clicking on my name below; I'd love to hear your creative ideas!



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