making tax time less taxing

What’s the best thing you can do to make tax time less “taxing,” so to speak? Set up your 2017 tax file today. Yes, you read that right – start now!

Of course, you also want to have a bin for incoming mail that’s exclusively for your 2016 tax documents as they arrive.

While it’s tempting to stop there, you’ll thank yourself later for doing the following: open the envelope and check the basic information to be sure it’s correct (your name, address, social security number, etc.). Doing that now, and requesting a correction if necessary, saves you and your tax preparer aggravation and time as the tax filing deadline nears.

Ready to take the next step? Using last year’s return as a guide, confirm that you’ve received all of the documents you are expecting – and any new ones if you’ve added investments and financial institutions. Go after any missing ones BEFORE you visit your tax preparer. While the normal deadline for mailing 1099s to taxpayers is January 31 or February 15, depending on the specific form, they may continue to trickle in, especially when corrections are made on the sender’s side. K-1s have a March 15 deadline but are notoriously late. If you file your taxes before all your information has arrived, you will have to file amended returns at additional cost.

But back to your new “Taxes 2017” bin, I find that the best way NOT to let things fall through the cracks and take advantage of every tax benefit, is to collect information as it happens. This means that as you incur an expense, make a donation, pay for a capital improvement on your house, and so on, you keep track of it either in an online document or paper file. The IRS agrees – they call it “contemporaneous documentation.” It’s their requirement for everything from recording medical and business miles, receiving confirmation of donations, and more. (Of course, your accountant should be your source for all tax information but there’s no reason not to be an educated consumer.)

So, while the weeks leading up to April 18 are what we call “tax time,” for me and my clients, building a tax file is a year-round activity. So why not make this the year you spread out the work, avoid the harried sprint to the finish line, and reduce your stress. I promise, you will thank yourself!

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Karen R. Caccavo

Karen R. Caccavo, MBA, Personal Money ManagerSM, is a daily money manager/financial organizer who assists seniors with their paperwork, including organizing tax information.While she doesn’t prepare client’s taxes, she was a volunteer tax preparer with the AARP Foundation’s Tax Aide program. You can reach her through her website or Karen@personalmoneymanager.net

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• making tax time less taxing - January 31, 2017