Yep, it’s that season again. And it’s stressful. Often the paperwork is more daunting than the actual check we may have to write; and psychologically the agitation we imagine is often much greater than reality. It’s natural to bristle at “administrivia” and avoid submitting our taxes until the very last minute. So before you read further, STOP. Once you read the next sentence you’ll be tempted to move on. Remember the pain you just felt, or are still feeling about your taxes? Prepare to change your behaviors for the future. Here are some tips NOW to make next year easier.
I. The File Folder
I’ve mastered this part of it. The tax process is still a mystery (interpret as “least favorite experience”) to my husband so he just knows to give items to me. We have a file folder called Taxes. Yep, pretty scientific. But here’s what is really helpful about it. It’s the catch all for tax information received throughout the year – and we receive more than you think.
- Clothing Donation receipts when we give to a charity
- Copies of our school and property tax receipts
- The occasional re-categorization of an IRA received mid-year goes in here
- Course receipts for continuing education
- Medical bills
- Quarterly advisor commission charges
You get the idea. The folder helps us ensure we capture anything that goes on during the year to maximize our deductions. It gives us peace of mind because we don’t have to think a second about all these pieces of paper – we just deposit and blissfully continue with life.
II. The List
This is new for me this year. My husband and I were so excited to get our tax return and documentation to our accountant early. Then 4 more receipts dribbled in. Two were not expected, but I should have expected the other two. Many expenses are top of mind like mortgage interest expense because it can be a big nut. However, for some deductions we might have quite a number in the same category. In particular, I have 5 charities I give to every month. You’d think I would notice if I had received all 5 tax receipts but no. I was so excited about getting the return in early that I didn’t check. So I’m preparing a list for next year that includes things like:
- All charities from this year
- All brokerage statements and corresponding commissions by company
- Compensation outside of paychecks, such as stock benefit transfers
- Long Term Care Payments – for deduction
- Inheritance claims (sadly, we lost mom last year)
The list will assist in a couple of ways. I’ll be able to check on what I’ve received versus what I should; I’ll remember to get the Long Term Care form for deductions since it doesn’t automatically come to us; and I’ll remember to focus on one-time items we don’t typically have. We do rely on our accountant to compare year over year but it makes it easier for all concerned if we get all of the right information up front.
III. The Photocopies
These tools are pretty simple right? A file folder, a list and photocopies. Simple ongoing habits make life so much easier in a stressful, urgent time such as tax season. I use the photocopier for our school tax bills. Here in New York, we receive one bill with payments due in September of one year and January of the next. So I make a copy after I’ve marked the September bill paid. That way one bill can be put in with my 2015 taxes and I already have another ready to go for the 2016 submission. Simple, and one less thing to worry about.
Small Behaviors Now for Relief Later
It’s tempting to just stuff the paperwork away after you sign the form and potentially shed a few tears over what’s due. Fight that relief. Remind yourself quickly how unpleasant the feelings are during tax season and just take the few steps above (or build any other process that might work for you). If you happen to like tax season and calmly complete your taxes in an orderly, Zen-like mode, you are a better person than I.
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Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Behavioral Cents, LLC and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.
Carrie Rattle is Founder of BehavioralCents.com and a veteran executive of financial services. She works with women to build money confidence and change their money behaviors for the better – without deprivation. Instead of simply telling women what to do, she helps them fight the tide of daily temptation to reach their dreams. Women gain control and feel comfortable making their own wise money decisions. Thoughts always welcome: firstname.lastname@example.org.
Carrie Rattle is a Principal at BehavioralCents.com, a website for women focused on mind and money behaviors. She has worked in the financial services industry for 20+ years and hopes to inspire women to better prepare themselves for financial independence.