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Take the Panic Out of Preparing for Tax Season
Does
thinking of April 15th put you or your clients in a state of panic? In
January of every year many accountants send out Tax Organizer booklets, but not all
clients use them. Some people have alternate systems in place which
help them get the needed information to accountants in an organized
manner. Unfortunately, many people still send off lots of loose
documents and receipts in no particular order. Accountants can work
more efficiently if they have been given the tools to do the job: Accurate statements about income, expenses and deductions.
No matter what the previous habits were and whether an accountant sends a Tax
Organizer package or not, there is value in streamlining the materials
sent to the accountant. By preparing an organized package and sending it in a timely manner, you or your
clients are assured that the
accountant has all the relevant information and will have time to
address the bigger tax issues. Accountants generally need to sort
through huge piles of disorganized papers for many clients, all
with the same April 15th tax return deadline. With such a contracted
period of time to accomplish this, it is no wonder that so many clients
need to have extensions filed.
Take
the Panic Out of Preparing for Tax Season - A Client's Story
After taking over the finances for her family, Carolyn was talking with her
accountant, telling him about having hired a financial organizer. He was
not sure what this kind of service had to offer, but his comments did not
faze Carolyn since she already appreciated the support Eddy & Schein was
providing her. Carolyn and Rebecca entered a year’s worth of checking
information on Quicken. Then tax season rolled around and Carolyn pulled
out two huge Redweld file folders filled with receipts that she and her
husband had been collecting. These were similar to what her husband had
given their accountant each year in the past. When Carolyn opened the
envelope containing the Tax Organizer booklet, she was overwhelmed by what
she saw as a daunting task; she did not know where to start. With Rebecca’s
help, she worked her way through the file folders and Tax Organizer.
Together they sorted tax deductible receipts and threw out irrelevant
papers. By comparing supporting documents, they checked the accuracy of the
Quicken report they had printed for 2007. They then used the relevant 1099s
to fill out the Tax Organizer. In the end, Carolyn delivered to the
accountant a four-page Quicken report, the completed Tax Organizer and a
folder of 1099s. She was prepared to hand it over before the end of
February. The accountant was elated and commended Carolyn on her judgment to acquire professional assistance.
Take
the Panic Out of Preparing for Tax Season - A Simple Approach:
1. Plan Ahead:
a. Know what tax related income and expenditures you have.
b. Keep records of tax related expenditures by hand, or on your computer,
categorizing them as you go along – charitable contributions, medical
expenses, business-related expenses, etc.
c. If you have any income that is not managed by a company that prepares
year-end tax documents (W-2, K-1, 1099, etc.), then keep a record of income
for yourself, such as rent from a rental property or tax refunds
d. Create folders: “Personal Tax Prep”, “Business Tax Prep” (if you have a
business), and “Property Tax Prep” (if you have property).
e. Into each folder put ONLY the documents you will need in order to fill
out the Tax Organizer or to back up tax returns should you get audited.
1) During the year the Personal Tax Prep folder would collect
- Thank you letters for charitable contributions
- If you can deduct medical expenses:
medical, dental, prescription, and eyeglasses receipts
receipts for trips to doctors/dentists;
medical insurance premiums paid, long term care insurance paid.
medical reimbursements received from insurance companies
- Tax refunds
2) In the beginning of the New Year, add tax reports showing income and expenses
- 1099s as they come in from banks, Social Security, and pensions,
brokerage
firms, mortgage companies, etc.
- W-2s from place of employment
- K-1s from trusts, partnerships, etc.
2. Prepare Your Tax Organizer Booklet
a. Review your records and find the sum amount for each category. A
computer program like Quicken can make year end organizing much easier.
b. Look at your Tax Organizer - last year’s numbers are in one column as a
guide.
Now, page by page, begin to collect the documents you will need to fill in
the amounts in the column for the current year. If you have a stock
portfolio with a bank or brokerage firm, stock sales do not have to be
copied into the Tax Organizer – you can reference the year end information
from the bank’s 1099. Just make sure that the document shows the cost of
stocks when purchased and the price received when sold, so your accountant
can calculate the capital gains.
3. If Your Accountant Doesn’t Use A Tax
Organizer Booklet
Following a system similar to that described above will make it easier for
you to prepare your tax records and will allow your accountant to complete
your return in a more timely manner.
In summary, tax returns range in complexity from the very simple to the
extremely complicated, but the basic concept of preparing your tax materials
is the same. If you or someone you know still feels too overwhelmed, a
financial organizer/daily money manager can help. Consider hiring one this
month so you can get a running start. Search for a professional near you on www.AADMM.com or www.NAPO.net, or call us for help in hiring a daily money manager/financial organizer.
Rebecca and Gideon's Speaking Engagements
Rebecca and
Gideon are available to speak to groups on a variety of topics related to
seniors and their families.
Sunday, February 1, 2009 from 2 to 4 PM at Sunrise Senior Living at Mill
Basin, Brooklyn
Rebecca and Gideon will address the topic: "Feeling Overwhelmed by
Paperwork?"
Previous Newsletters Archived
At any time, from our home page at http://www.eddyandschein.com, you can click on the “View Archives” link situated below the subscription sign up space.
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If you found our newsletter informational or useful, please scroll down to the bottom of the page and click on the link below - Forward to a friend - to send it to anyone else who would benefit from it!
Please
feel free to contact us and take advantage of our free telephone consultation. We would
be happy to talk to you about how we can provide Life Keeping, Not Just Bookkeeping®.
Sincerely,
Copyright, December 2008, Eddy & Schein, Inc.
About Us
Partners Rebecca R. Eddy and Gideon Y. Schein, both MBAs and certified Professional Daily Money Managers, have a primary focus on the needs of an aging population:
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Seniors who need help in organizing and streamlining tasks such as expense and revenue tracking, bill paying, health insurance claims management, or providing regularly required information to accountants and lawyers.
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Seniors who may or may not have an estate plan in place, but need to catalog assets and personal effects and coordinate and track philanthropic activity.
To learn more about us, check out the May 2008 issue of Kiplinger’s Retirement Report. It describes the services of daily money managers and quotes one of our clients.
Our Promise
Eddy & Schein In-Home Administrators for Seniors® is dedicated to making life easier when it comes to managing seniors' personal administrative matters. From simply gathering and paying bills each month to performing a complete review of seniors' financial and personal affairs, we provide exactly the help needed. Working with Eddy & Schein, clients are given private, one-on-one attention at home. Together, we’ll develop a plan to address our clients' specific needs. And of course, privacy is strictly guaranteed.
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