06 February 2006

Keep Those Receipts!

I finished my taxes over the weekend (would have had them done last weekend, but was waiting on a W-2). This week I will focus on tax-related items for preparing your returns this year and making next year's process that much easier. Today's installment is for next year.

Keep Those Receipts!

I managed to do my Federal and State taxes in under two hours on Saturday and Sunday. While it has something to do with the fact that I do it for a living, but it was also because I was organized.

My wife and I keep all of our receipts that could potentially have tax consequences. Chartiable donations, my wife's classroom expenses, contributions to our daughter's college fund, etc. All year we have a manilla 9x12 envelope in the same area as our unpaid bills and we drop the receipts into the envelope. Come tax time, all of our receipts are in one location and we just have to organize them.

We use Microsoft Money to manage our finances (checkbook and credit cards). Money has a feature that allows you to check a box when a payment is recorded to identify it as a tax-related item. At the end of the year, a report can be run where all of your tax-related payments are on one sheet. This doesn't replace receipts (which are the best record for IRS purposes) but can be a nice way to reconcile the receipts to make sure that nothing is missed.

How complicated is our system of receipt keeping? Not at all. How easy does it make tax time? Much easier.

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