Money Talks, So Should You

Homecoming King: Preparing for your tax preparer

Jim McLaughlin
by Jim McLaughlin, Dimespring 30

I know almost nothing about taxes, other than that I can’t afford to pay any more for them than absolutely necessary. That means I’ve started to save a lot of documents on the off chance I might be able to write them off this April 15. But keeping them organized and knowing what to do with them in the past has been a challenge.

Luckily, my Uncle Ken, a friend of the family, is a CPA and graciously does our taxes each year. And each year, I not-so-graciously drop a folder of crumpled paperwork at his door sometime in the first or second week of April for him to sift through and figure out so I don’t have to.

READ: 4 things to do with this year's tax return 

That used to not be such a burden because I had no assets, small paychecks and very little to account for. Most of that is still true today, but some education grants, student loan interest payments and career expenses have made it all a bit more complex.

To prevent my Uncle Ken from throwing up his hands and leaving me for the IRS to suck the marrow from my financially worthless bones, I did my best this year to organize things for him — and for my own peace of mind.

My hope is that knowing what types of expenses will impact my taxes each year will help me make more beneficial financial decisions and avoid harmful ones in the future. Plus, it keeps my conscience placated. I imagine the same would apply even if you went to a professional tax preparer instead of mooching off a kindly family friend.

I started by making a list of all the types of documents or information that could be relevant for my tax return. I’m no accountant, so this is hardly an exhaustive list, but I aimed to err on listing too many instead of too few. In some cases, I listed items and expenses that I knew I didn’t have documentation for, figuring if it was relevant I’d cross that bridge when I came to it.

My list included: my W-2s and pay stubs for freelance work, tuition bills and statements from my grad school program, application fees for my teaching license and required fingerprinting, estimated work commute mileage and parking, receipts for payments related to car repair and registration renewal, a life insurance policy I purchased, bank statements from year’s end, printouts from Amazon for anything I bought for grad school or my classroom, estimates of my moving expenses when I rented a Uhaul last fall to move back home, charitable donations (for things that didn’t fit in the Uhaul), my cell phone contract and a bill (I use my phone for work fairly often), some medical bill stubs, gym membership contracts and receipts and estimates for professional clothes I bought.

INFOGRAPHIC: E-filing taxes on the rise

Once I’d piled up my existing documents and written down my estimated expenses, I separated them all into file folders designated: Income, Health Expenses, Professional Expenses, Student Expenses, Charitable Donations and Other Expenses (These were my pie in the sky items that I wasn’t sure would actually count as tax credits, but I was willing to ask my uncle about).

On the outside of the folders, I stuck a big Post-it note and wrote which documents were in there and how much they were for, and my estimates underneath that. I did not total those expenses, figuring some of the items wouldn’t count toward my taxes.

On some papers, like my Amazon invoices, I highlighted the items I thought were relevant for my taxes to distinguish them from other things I purchased.

This is worlds better than what I’ve submitted to Uncle Ken in the past. There’s probably more I can do to make my tax filing work for me and to make Uncle Ken work less. I’ll update with some tips once I get his feedback.

 

Jim McLaughlin is a member of the Dimespring 30, a community of bloggers sharing their thoughts, experiences and perspectives on personal finance.