Kudos to two savvy taxpayers, Marie and Fred, whose strategies for organizing data, preparing and filing their taxes are inspiring and noteworthy.
One is a small-business owner who runs an antique shop, the other a private citizen who just retired from his job as a career IRS computer programmer and analyst.
Antique Dealer
The antique dealer I interviewed, Marie, commented that her business financial records have mostly gone digital. Because business tax rules and regulations in this country can be confusing and burdensome, most businesses have to hire a full-time person just to deal with tax compliance. Marie’s strategies help her deal with these onerous regulations.
Marie is a ‘front-end’ type of filer so she set up an Excel spreadsheet years ago when she first started her business. The excellent nature of the Excel spreadsheet allows Marie to keep all the financial records in one compact location. Excel provides all the tools she needs to manage her accounting books for her business, including new ways to collect and calculate as well as many time-saving features.
Tip: Her biweekly input of her tax data throughout the entire calendar year is her primary strategy for taming the tax beast.
When it is time to go to the accountant to do the annual tax filing, Marie simply prints out her Excel spreadsheet and delivers it to the accountant. Marie’s accountant is delighted with her efficient system. Her year-long attention to the details of her business financial records allows her to file her business taxes in just a few hours.
The IRS analyst
For most of us, the filing of individual taxes is what consumes our thoughts at this time of year.
This brings me to the story of Fred, the career IRS analyst, and to his system for his personal income tax filing. Fred’s IRS career spanned thirty years, and he saw, first hand, what the lack of planning and financial organizational systems does.
Fred is also a ‘front-end’ type of tax filer. Fred’s personal tax-filing system consists of a year-long collection of all financial data related to his and his wife’s income and expenditures. He established a file box system with various folders dedicated to income documents, interest and dividend documents, estimated tax documents and charitable giving receipts.
Tip: He updates his files and folders weekly throughout the calendar year. This system of immediate documentation and record keeping takes some discipline, but it sure pays off when the tax man comes to call.
Fred uses tax software, specifically TurboTax, which is the #1 tax software on the market. This excellent software can be purchased at Amazon for $49.99. The nice thing about TurboTax is that it stores all previously presented information and past tax documentation so that data can be imported from prior years’ returns into the current return. As Fred progresses through the TurboTax program the program prompts him to input this tax year’s numbers for his income and deductions.
Of course, as TurboTax prompts Fred, he has fingertip retrieval of all his information because he filed it all through the year in his folders and file box. It rarely takes him more than two hours to complete and electronically file his tax return. Fred considers TurboTax to be indispensable because of its unique capabilities to import data from prior usages, its prompts to the user to do certain actions and fill out certain forms, and finally for its ability to be filed electronically via the internet. It also stays current with all tax laws and will prompt the user with questions about issues they may not have even considered.