6 Things You Can Do All Year Long to Save Money on Your Tax Bill
How tedious it must be to spend all your time thinking about taxes. Don’t you wish that you could just push it to the back of your mind and deal with it at the end of the year?
Actually, that’s exactly what most taxpayers do. Which is why they end up overpaying their share of the tax burden. What fools these taxpayers be—to paraphrase Puck from A Midsummer Night’s Dream.
Do you want to be smarter? Without being obsessive? Just develop some good tax habits.
Here are six things you can do all year long to save money on your tax bill:
1. Save all the paperwork. Even if you have the tiniest inkling that it will generate a tax deduction or that you can get it reimbursed by insurance or work, save it. You can always sort it out later.
2. Set up a filing system for all those things. You can make it simple, like dumping everything into the “tax drawer” or “tax box.”
Or you can be a little more organized and use a filing system. The simplest filing system is an expandable file with lots of pockets. It can cost anywhere from $4 to $40, depending on its complexity. I like to snap these up whenever I see them in the dollar bin.
If you want to get even more organized, you can use a full-blown bookkeeping system like the Tax MiniMiser. Or be more formal and set up a couple of nice, neat Pendaflex® folders in a filing cabinet—if you have complex needs.
3. Do a little bookkeeping each month.Whether it’s strictly personal, for employee business expenses, or for your small business, doing it monthly gives you a better picture of your finances year-round. It can even be fun. There are lots of free tools at your disposal—and some even have mobile functions. Here are two:
- Mint.com: This nifty tool from Intuit, the Quicken folks, allows you to upload your bank statements and stock trades and helps you budget. It also has great graphs.
- Outright.com: This is great for small businesses and pulls in your bank and credit card activity automatically. It integrates with all kinds of other apps.
4. Do a little painless reading throughout the year. Tax laws are changing rapidly this decade. Taxes have become political football. The best place to keep up with tax breaks and financial information is, naturally, the Equifax Personal Finance Blog, right here. We will keep you updated and summarize the important tax and financial issues so you don’t have to search the web for the tax issues that affect you.
5. Do yourself one very big favor. Twice a year, aside from your tax appointment, meet with your tax professional to review your “tax portfolio”—your personal menu of tax benefits and tax attributes. It’s well worth the investment to have one appointment early in the year to get a basic plan established, and another appointment in the fall to rebalance your tax portfolio.
6. At least once a quarter, schedule some Money Time with your family. It can be a fun family discussion, using your software’s charts and graphs to make it visual and more playful. If you don’t have a family, partner up with your best friend and schedule Money Time to keep each other on track.
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