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With April 15 fast approaching and taxes on our minds, I offer to you some great tax saving incentives to help motivate you to de-clutter. You can’t effect last year’s taxes, but you can start making an impact for 2011.

As you begin clearing out a particular area of your home or office, it is well worth the effort to corral items that are in good enough condition to be donated for use or re-sale to a non-profit. The result for you is less clutter, cleaner space, less to put away and a receipt…which is a tax deduction.

The best and most efficient way to do this is to make a list while you are adding to the donation bags of the items you will turn in. Some charities offer valuations of items. A great on line tool is from the Salvation Army.
Salvation Army Valuation Guide

I have two quick stories of clients I worked with in 2010 that are thrilled with their de-cluttered space and their tax receipts.

One gal was a book lover. We (I had a helper for this) removed 950 books and donated them to Bookmark Bookstore in Oakland. This is a non-profit whose proceeds go to the Oakland Public Library. The client still had plenty of great books in her house. She gained bookshelf space and regained floor space in her house that had been filled with piles of books. Best of all she has a huge receipt which details the number of soft and hardback books donated. That will have an impact on her taxes. Oh, and by the way, we took a few photos in case there were any questions about the donation.

In another case, the client told me this week that she added up all the receipts from her donated goods and it came to over $17,000. A large portion of that was clothes, books, household items and more that we had collected throughout her house over the course of a few months. Her response to this was, “And I don’t miss any of it!”

Finally, there is the “feel good” part about donating your un-wanted items. It is nice to think that someone else may need something you no longer want or need. This is re-cycling at its best.

You have completed the “rough sort”, gotten rid of the junk, and  sorted your big pile into smaller ones.  Now you are ready to put these into file folders

• One color (manila works best) file folders.
• BOLD (possibly colored) markers.
• Hanging files for file drawers (cabinet or file box…either way you need a container).
• Use one color.  Why?  because you don’t want to get hung up on colors if you run out of one color.  If you really like color coding files, buy BOLD color markers.  Sharpie is making thinner tips in many colors.  Pick up a pack.

1. Title files with names that are meaningful to you.  There are no rules that you need use certain names.

2. Don’t use numbers.  instead or 2010 Taxes, say Taxes, 2101.
   

3. Put your piles into the folders.

4. Hang a group of hanging files in your container.

5. Make TABS with BIG HEADINGS straight down the center.  Don’t stagger the tabs.  Arrange in alphabetical order.

6. Make a second set of TABS with smaller headings for the sub categories and line them up straight down the right or left side.

• Why don’t you stagger the tabs?  It is less jarring on the eye to keep them all lined up.  Also, if you add a hanging file later it will mess up your stagger pattern and throw you in a tizzy.
• Why all these rules?  It is proven over and over that labeling and using an alphabetical system us easier to use.  Remember, you are setting this up to find things later.  Make it as logical and simple to use.

OK, you are ready to tackle those taxes…but don’t call me for tax advice.

You have completed the “rough sort” and got rid of the junk, and you sorted your big pile into smaller ones.

Third Step: Breakdown your categories and set up files

Take the piles from last week’s first sort and start breaking them down to smaller groups. The financial pile now becomes your individual banks, credit cards, investments, etc.

(What about those papers that don’t fall into obvious categories? Make one pile personal items and deal with those later. This might include magazine articles for day trips, an item you might want to buy, a hairstyle you want to show your stylist, information about different counter top materials…you get the picture. We are focusing on financial papers right now. We will come back to these personal papers later….)

Next week we are going to make file folders and put them in a place that makes sense (not the kitchen table or the floor)

Here are a few good links to help you with your tax preparation.

selftax.com online tax preparation from FREE….
Dennis Middleton CPA If you are looking for a CPA to help you with your taxes, I recommend Dennis.

Last week you completed the “rough sort” and got rid of the junk. If you still have questions of what can be tossed, see the IRS link below.

Second Step: Sort Like with Like

*Take that big pile from your quick “rough sort” and start to break it down.

*Use BIG categories like insurance, auto, financial, medical.

*Don’t get hung up on smaller categories and the specifics (yet). Those will come later.

Most likely you will have several types of insurances, but for right now celebrate the fact that you got all the insurance paper in one place. The same is true with financial: banks, credit cards, investments, etc.

Next week we will move to step three: setting up files

Incredibly useful links for Tax Preparation

Click on these links below for useful information for tax preparation.
Self Tax.com This site has FREE through very inexpensive online tax prep.
Dennis Middleton CPA.com If you are looking for a CPA to help you with your taxes, I recommend Dennis.
IRS.gov IRS guidelines for paper retention Here is the source from the IRS.

Tax Paperwork; Where to Start

It may only be February, but it is never too early to start organizing to prepare your taxes.

First Step: get rid of the junk

Wherever you keep your paperwork: the kitchen counter, dining table, home office floor, all of the above…it is time to sort through it and get to the important stuff. Keep in mind a main purpose of getting organized is to find things later. It is really hard to find the important things when they are burried under those that are not important. That is the clutter.

Do a “rough sort”.
1. Quickly start tossing the junk.
2. Pull out catalogs and magazines you will read later.
3. Keep a big pile of everything you are keeping.
Don’t get bogged down with what those things are and where they will go. Just slug through this “rough sort” and get rid of the junk.

What is the Junk?
Third Class mail, any solicitations you did not request, and coupons you will never use.

BONUS: You can see your counter, table or floor and even use it.

Next week we will move to step two.

Tax Time Tips

Taxes and death…inevitable to all, and we all agree that preparing your taxes is not our favorite thing to do. I personally can’t save you money, or make this go away, but I can offer a few ideas to save you time and lower the frustration levels.
1. Set a time line. You need to know who is going to prepare your forms. Is this you or an outside service like an accountant or tax preparer? If you are going outside, you need to know the deadline to get them all your supporting documents. If you are preparing your own taxes, pull out your calendar, work backwards from the 4/15 deadline, and make appointments with yourself. Include all the steps listed below.
2. Pull all the supporting paperwork together. Sort in to main categories including: income (wages and salary doc.s, investing income, and more), deductions (Contributions, business expenses, etc.), any other supporting documents.
3. Clear the clutter in your work space. At a minimum clear an area at your desk, computer, where-ever you are going to do the actual work. Other papers and projects will just distract and bother you while you need to concentrate on your taxes.
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Hint: keep all you papers together between work sessions. File folders for each of the categories listed above will help you keep things organized. Make sure they are clearly and boldly labeled.
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4. Purchase and install tax prep. software if you are using this.
5. File your taxes either on-line or in the mail no later than April 15th.
6. Set up a better filing and storing system for next year. Yes, do it now while it is top of mind, while you have good ideas for how to make this easier next time and so that you can use it all year!
Good luck and I hope you meet the deadline!