I know 2018 has just begun, but tax season is coming. Before I know it, an IRS Spearow will be a-rattata-ta-tapping at my window, trying to collect my 2017 taxes. Businesses have until the end of January to get us the tax documents that we need from them. February, I usually gather my receipts together to determine if an itemized deduction will help or if I should just take the standard deduction. March, I file my taxes before the slush rush to get taxes in before the April 17th deadline. These tend to be the three months I focus on my taxes and my tax record keeping habits. In 2017, I did a horrible job tracking the information I will need to complete my 2017 taxes this year, and even worse sorting my receipts, checks and other paperwork from 2016. Hoping to turn over a new bayleef, I plan on starting a 2018 Tax Notebook. In this three-ringed binder, I plan on tracking all of my general receipts, business-related receipts, large purchases, medical expenses, paychecks, and my future tax documents. I dream that once 2018 closes, I will instantly have everything ready for the tax spearow and I will store it easily for the following 3-7 years. General Receipts
Over the years I have developed the habit of keeping my receipts. I started in grad school when I was tracking my spending. Although there are many great reasons to keep my receipts, I mainly do it for tax purposes. Receipts are better documentation of my purchases than my credit card statements. They can tell the IRS exactly what I bought during that specific purchase. This can be very helpful in the case of a surprise audit. My problem with receipts is that they pile up on my desk and never get processed. I have heard that scanning them is the best way to store them. But, I’m going to be real with you, I find entering receipts into computers as enjoyable as an Alolan SOS Battle and just about as time consuming. I am a shopper for my day job, and about 20% of it is entering receipts into a computer. I don't want to come home and feel like I never left the office. I plan to place 12 envelopes inside my 2018 Tax Notebook. Throughout each month, I will put my receipts in a shoebox. At the end of the month, I will place those receipts into that month’s envelope. I will also use this opportunity to separate my general receipts from my business-related receipts. Business-Related receipts Being a freelancer means that my small business, me, occasionally will be hit with some recoil expenses. Recoil expenses are the expenses that I pay in order to find a job or do my job in order to earn money. For example, when I pay for this site’s hosting, that is a recoil expense. When I am costuming a show and I purchase a costume piece to add to my costume stock, that's a recoil expense. These are only two of many possible examples. If I have clear documentation of my recoil expenses from during the year, I can deduct those from my taxable income. The way I understand it, it shouldn't count towards my income because I needed to spend it in order to make my income.* I usually track these with a chart that says when I spent the money, what I spent it on, why I spent it and where I spent it. I keep all of those receipts together and make sure they are clearly labeled for business. I will continue this but move it from my Design Notebook into my 2018 Tax Notebook to keep it with my other tax information. Large Expenses I don't believe large expenses can be deducted from my taxes,* but I think this is just a useful thing to record. In the past, I always thought I would remember the year's large expenses, but I don’t. By recording these large expenses, I hope that I will be clear body clear what my largest expenses of the year were. Who knows, maybe someday there might even be something I can count towards a deduction. Medical Expenses Sometimes person’s medical expenses may qualify as a deduction. Usually, I don’t qualify. However, since I am starting this 2018 Tax Notebook, I want to make tracking these expenses a habit. I may never need to qualify for this deduction, but I don’t have future sight. By developing this habit now, my notebook will be prepared to battle if I ever need it. Plus, we want kids someday, and it seems like kids visit pokémon centers an awful lot. Paychecks I like keeping my paychecks through the year for two reasons. The first, I enjoy having a sturdy idea of how much money I have made throughout the year. The second, it also tracks my freelancing paychecks. Freelancing income can be a magnitude to my annual income. Some years I get enough freelancing that my freelancing income deals a great amount of damage, like a magnitude 8. Other years my freelancing income deals very weak damage, like a magnitude 4. Tracking this income is very important when it comes to filing my taxes. I typically won’t earn enough money from a single freelancing job to warrant receiving tax documents from them, but I still need to claim any undocumented income on my taxes. Future Storage If this 2018 Tax Notebook goes as planned, I will add my 2018 tax documents to it when 2019 rollouts and my notebook will be complete. Then once tax season begins, I can bring it to my tax person and they will have everything they need in that one and half inch binder. Ideally, if this notebook works well, storing it will be a gust. I can easily store seven tax notebooks on a bookshelf. I also will be ready for an audit or if I need to reference any old returns. As I grew up, my mother always kept her tax returns and documentation for seven years. Although it is not the rule, I use that as my standard.* I hope that this notebook will be a wide lens creating more accurate records of my taxes. Since I plan on hiring a tax person, instead of a computer, to help me with my taxes this year, I plan on asking them what other documentation I should add to my notebook. Now, to sweet scent all of my documents for 2017's taxes. Let’s Chat: What do you keep for your taxes? How do you store them? What do you think I am missing from my list? Further Reading: Don't Hate the IRS - Follow These 8 Tax Filin Tips- Retire Before Dad 3 Important Tips for Filing Taxes with Multiple Jobs- Money Peach *Remember, I AM NOT a tax expert, nor did I consult with one when writing this post. Please always consult with your own tax expert before filing your taxes.
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