Wednesday, February 6, 2013

WHW: Organization - Tax Returns

It's that time of year again. :) The first year DH & I were married, we hired an accountant to do our taxes. It was definitely easier - I was self-employed and worked half a year in PA before we got married and I moved, plus it was our first time filing a joint return. After that first year, I was determined to resume doing them myself. I am an accountant's daughter, after all. I did have my Dad proof it that first year though! :) TurboTax makes it quite easy, I think.

Since I started doing my own taxes, I've come up with a few methods that really work for me, and I thought I'd share in case it might be helpful for you. 

Things that will make this year's return interesting:
I'm self-employed (this has gotten much easier; I will explain below)
We adopted in 2012 and now have to paper-file (we normally e-file)

What's working for me:

1) Quicken
I track all our accounts this way - we have a personal checking account, my business account, and a charitable giving account. I cannot emphasize enough how helpful Quicken has been! 

2) My business account - I make all my deposits from home. Once I deposit a check, I save the image as a PDF on my computer using the month and year, name, amount and check number- in my "Piano" folder in another folder marked "Deposits". This eliminates saving checks or paper. Yay!! :) (And yes, everything is backed up on an external drive.) In Quicken I use the "notes" section to indicate the deposited check number and name of the person writing the check. It's super easy to match with my PDF images of the checks should the IRS come knocking for an audit.

3) Charitable giving account - separate from our regular checking account. At the beginning of the month I transfer our planned giving amount to this account - one transaction. All checks and automatic withdrawals come from this account. Again, I track this in Quicken and indicate the check number in the notes section so I can match it to our bank records. 

*If you tithe, which we do, charitable giving is often one way the IRS comes to call. A separate account was recommended by our financial advisor, who was himself audited for this reason. 

During the year I keep paperwork related to our charitable giving in a file in our cabinet. It's easy - if something comes in the mail, I just file it. I don't like the chance of misplacing it so it immediately goes here. A few of the organizations we give to send statements multiple times per year, so I toss the old one when the new one comes. I also use this file to keep track of times we donate "goods" rather than money. 

I staple or paperclip the list of goods to the receipt the organization leaves at the door. If you schedule online pickups, organizations like Purple Heart and Lupus Foundation keep track of when you donated so you can print out a list at the end of the year. It's also helpful to take a photo of the donation in case audited, especially if it's a large donation. Just spread the stuff out before you put it in a bag or box and save that with the receipt or on your computer. 

4) This file tote. I got it during a sale. You certainly don't need anything fancy, but this works for me because it's all in one place. It's the perfect size for 10 hanging file folders.
Container Store Bristol Desktop File

Here is how I organize it:
I have 10 folders in the file box. One for each tax year.

A close-up.

So for tax year 2012, I will file our return in the file marked "2 - - 2". Then I'll shred the tax return for 2002, which is currently in the file. Since it's recommended you keep your returns for 3 years, I'm covered. I tend to keep them a little longer since I have a small business.

You can see a list of documents and how long to hold them on Suze Orman's site here.

  • Income Tax Returns (Please keep in mind that you can be audited by the IRS for no reason up to three years after you filed a tax return. If you omit 25% of your gross income that goes up to 6 years and if you don't file a tax return at all, there is no statute of limitations.)
  • And the IRS list found here.

5) Finally - this zippered file folder. It has a hot pink lining, how fun is that? It's the little things, people. :) Come January, any paperwork I need when starting our return is placed here - W2s, mortgage papers, charitable giving year-end letters, etc, go here.

Keeping those papers in one place is helpful when I sit down to use TurboTax. (I will confess I don't usually manage to enter everything at once. I will sometimes sit down and work on it as things come in. I like to have our return filed by the end of February!)

Do you have any tips for organizing your tax paperwork? Please share in the comments if you do! :)


  1. I wish I could hire you to come & do our small business taxes. I end up with about 2 boxes of receipts to sort thru, before I can begin. We keep them seperated by month. I just don't want to deal with it but just once a year..So February is spent on taxes. Thanks for all your tips !!

  2. Love the tips!! I think we would get along great ... You are so organized!!! :-D
    I have a less organized system, but it works for me ...I put all our tax deduct stuff in one folder, put all our adoption stuff in another folder (it was SUPER helpful to make copies of expense stuff as we did things, not try and scramble at tax time) and yes, have a folder for all our tax info papers/w2's, etc. Makes it easy.
    We use Turbo Tax also. It's pretty good, I think.


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