I am about to conclude my little series on Tax Tips, and I thought I would include a short article about planning.

I have been asked to give tax advice quite a few times and have prepared several returns for clients as well.  One thing I always ask them and it is really a rhetorical question that they should be asking themselves is…

When do you start planning for your taxes?

For example, when will you start to plan for your taxes for next year?  Will that be January 1 of 2011?  Will it be whenever you get your W-2s next year?  Will it be as close to April 15 as you can possibly stretch it?

In my book (literally) those answers would be wrong, wrong and wrong.  If I were ever asked this question, my answer would be-”I already started“.  I started planning for next year’s taxes on January 1 of this year.  Yep, sure did.  This is when your fiscal year begins, isn’t it?  Therefore, that’s when you need to start your planning in order to capitalize on all of your possible credits and deductions.

Does this seem like overkill?  Like too much work?   Like not worth the bother?  All of those three are possible reactions.  Again, I think they are all wrong.  Once you do a little shift in your mindset and just put your taxes in the very very back of your mind throughout the year, none of this should take too much out of your daily/weekly/monthly routine.

Let’s go through it real quick.  We’ve already determined that you should have already started planning for next year’s return.  Even if you haven’t yet, it wouldn’t be hard to catch up.

In a previous post, I talked about the four main categories that I track for deduction purposes.  They are JREs (Job-related Expenses), JSEs (Job Search Expenses), UMEs (Unreimbursed Medical Expenses) and Charitable Donations.

I try to pay almost everything with a credit card.  This makes tracking these expenses much easier.  I use one card strictly for my Job Related Expenses, so that statement goes into my “tax” file each month.  With my other major credit card, I simply quickly scan the statement each month, and then write UME or JSE or whichever particular acronym applies to a charge, and file that away too.

Then, come tax time, I simply collate and add up the individual categories and I’m done.

I also keep track of any other expenses or receipts throughout the  year that I know are tax deductible.

In a nutshell, these would be:

Tax Preparation Fees (price of my software, e-filing fees).

Automobile Tags and Emissions fees

And all relevant receipts for  charitable donations (check numbers for church donations, receipts from Goodwill, etc.).

And that’s it.

So you see, just by planting that tax “seed” in the back of your head at the beginning of the year can put you well on your way to making the most of your tax return.

As always, your comments and suggestions are appreciated below.

Continuing on with my Tax Tip series, I thought I would take a few minutes to discuss the many benefits of donating, and how I firmly believe you should factor it into your life to some degree.

Let’s jump right in.  I think that there are three main benefits to donating, and they go in no particular order.

First, it is a tax deduction.  As long as you keep track of your receipts, donate to “qualified organizations” and honestly valuate your items, you are most certainly entitled to write off these items on your taxes.  There are some limitations, but I usually donate between $500 and $1000 worth of money, items and so forth on an annual basis.  That makes for some decent tax savings.

Second, it is the right thing to do.  If you are fortunate enough to even be in the position to where you have unwanted items around your house, to me donating is the right, Christian thing to do.  I came from a very middle class upbringing.  We were by no means poor, but we certainly didn’t have unwanted items piling up all over the place.  If you can do so, try to remember all the people out there who are less fortunate than you are.

Third, The De-Cluttering Effect.  Setting up some sort of donation system in your household can prevent your house from ever filling up with too much crap.  A “de-cluttered” house is a beautiful thing!

Let me tell you the process that I go through before deciding to donate something.  First, I determine whether or not I can sell it.  Then, I try to find out if a family member or a friend is interested in the item.  And finally, if it still works or is still useable, it gets donated (trust me; this thought process takes all of about 10-20 seconds with most things).

A far as any tips and/or pointers on the donating part itself, here is what I have found to be helpful.

Donating only to a qualified organization.  Basically, this means to a church or the Salvation Army or a similar organization.  Giving two garbage bags full of clothes to your cousin Jimmy really doesn’t count.

Valuate your items fairly.  Be careful here!  I read somewhere that overvaluing donated items is a huge red flag to the IRS.  Most of your stuff will not be worth much, and if you use a “thrift shop” mentality, you should be fine.  When in doubt, go low.

And finally, save your receipts.  My donations to my church I always make with checks, so I have a paper trail, because the churches I have always been associated with were notoriously BAD when it came to keeping track of this.  Also, whenever I drop stuff off at the Goodwill, they always ask if I want a receipt.  I always say “yes” and immediately describe, date and value the items.  The receipt then gets tucked away in my “tax” file for the end of the year.

Donating is good for your soul, good for your house, and good for your wallet.  Why wouldn’t you want to start doing it?

Comments and suggestions are greatly appreciated below.

In yesterday’s post, I spoke of the power and benefits of itemizing your taxes.  Today, I’d like to go through the basic process that I have set up for myself that I feel allows me to best capitalize on itemizing.

And of course, I can only comment on the situations and tax considerations that are relevant to me.  I don’t own real estate, I don’t really play the stock market, so if there are some things that I fail to mention that you feel might be relevant to the conversation, please feel free to add them in the comments section.

There are four “biggies” as I see it that I do my best to track and stay organized for throughout the year.

I pay for as much stuff as I can with credit cards, that way the organization part basically just comes from scanning my credit card statements each month and filing them in their appropriate place. I do try to keep all pertinent receipts, but I think this system is a little more hassle-free.

The Four Biggies—

UME’s (Unreimbursed Medical Expenses)-Pretty self-explanatory.  Its anything that you paid out for medical bills that you weren’t reimbursed for.  Over the counter stuff doesn’t count, and please do your due diligence to see what falls under this category and what doesn’t.

JSE’s (Job Search Expenses) Did you know that if you are in the job market that a lot of these expenses are deductible??  Mileage to interviews, resume writing fees, association dues, clothes for interviews, etc.  If you’re actively seeking employment, there could be some good deductions here.

JRE’s (Job-related Expenses) I have a credit card that I use just for this topic, so keeping track of it is a breeze.  I use this credit card for all my dry-cleaning expenses, and all my “uniform” expenses.  That is, whenever I need new ties or dress pants or shirts, it goes on this card.  At the end of the year, I just add up my charges on this card, and I’m done.  Mileage for your commute is also deductible; just be sure to follow the instructions.

Charitable Contributions-If you don’t currently donate stuff (whether its time or money or unwanted items) then you should.  Of course, your time isn’t tax deductible, but I say this only because if you have the ability to “give back” then you should.  It’s the Christian thing to do, if you were in a position of need, you’d probably want people to give you as much as they could, and finally, a lot of it is tax deductible!!  Just make sure it goes to a “qualified organization” and don’t over inflate the value of your stuff-this could lead to issues down the road.

So there you go.  This is basically the sum and substance of my entire organizational process for my taxes.  It’s not that hard, and I do feel that I generate more revenues (by paying fewer taxes) by keeping up with it.

Hope you found it helpful.

As always, comments and feedback can go below.

I’ll never forget it.  It was the first year of filing my taxes after I bought my first home, and I had no idea what to do.  I knew that whipping through a 1040EZ would just not get it anymore.  I had heard of all the new tax considerations that came along with owning a home, and I wanted to take full advantage of them.

I considered taking my taxes to an accountant, but I had done that before and really got burned.  I was charged way too much money for the amount of work done.  I had an idea I could do them on my own, but was just a little leery about the whole process.  Finally, I threw caution to the wind, bought some tax software and dove in.

It wasn’t too far into the process where  I first encountered that dreaded word “itemize“.  It used to strike fear into my heart!  I had visions of piles of paperwork and receipts, scouring through them for days to make sure I got everything right.  The process of filing my taxes, which used take me all of about 30 minutes, I was now convinced would be more in terms of weeks and not minutes.

Regardless, I decided to do it.  I answered all of the questions in the “itemization” section of the interview on my tax software.  Shockingly, this was done in just about an hour.  I knew I would have to go back for a few things because I didn’t have ALL of the information that I needed, but I had most, and the process was not very painful at all.

My point is this.  If you are intimidated by doing your own taxes, get over it.  It’s not that hard (this has been covered in other posts).  If you are not itemizing, you should seriously look into it.  There is possibly a great deal that you might be leaving on the table by not itemizing.

I can’t remember what the standard deduction was the first year I itemized but I think it was around $12,000.  After completing the process, my total dollar amount for “deductions” was close to $17,000.  This means that I paid taxes on $5,000 less that I would have if I hadn’t itemized.  I am guessing I was in about the 28% tax bracket at the time, so I guess I saved myself about $1400 that year.

This past year, it wasn’t such a huge savings, but it was still well worth it.

I will tell you this, though.  In order to effectively itemize, you do have to have a certain degree of organization.  You need to know what you paid in certain categories, and the best way to do this is to keep track of it throughout the year.

Before you start moaning and groaning, please believe me when I tell you that this process is not that hard.  What you’ll need is nothing more than a small file folder and you need to do a little thinking on a monthly basis.  I will get more into this in a post a I have planned for later on this week, but basically I keep track of my out-of-pocket medical expenses, any money that I spend related to my job that is not reimbursed, anything and everything that I donate throughout the year, and besides a few other minor things that’s about it.

In short, consider itemizing.  In most cases, you’ll be glad you did.

As always, your comments and feedback are greatly appreciated below.

Although this series may be a little late for most, I wanted to summarize a chapter for you that is included in my book “Don’t Be A Mule…”  I devoted an entire chapter to the subject of taxes because after I finally decided to somewhat educate myself on the subject; I realized what a pivotal role that filing your taxes can play.

Among other things (which I will get to in future posts) the biggest piece of advice that I can give to you regarding taxes is to do them yourself.  For those of you that simply take your W-2’s into some walk-in place and walk out with a check a few days later, let me give you a newsflash—You are wasting large amounts of money.

Most of my co-workers choose this route, and honestly, my heart goes out to them.  It goes out to them for the money that they are wasting.  This money is yours, believe it or not.  Why would you not want 100% of it?  Also, who knows your finances better than you?  Some stranger you go see once a year who knows nothing about you?  Or you, the person that has been in your shoes for the last year.  Honestly, I can’t even imagine entrusting someone else with this task.

Besides a few rare exceptions, for example, small business owners or other people who simply have personal finances that are too difficult to keep up with on their own, it is my firm belief that everyone should file their on taxes.  As I stated, you know your situation better than anyone else and you will certainly look out for yourself better than anyone else.

I filed my taxes myself for the first 20 or so years of my working life.  At that point in time, it was simply a matter of filling out the EZ form and mailing it in.  Well, after I purchased my first home, the thought of doing my own taxes scared the hell out of me!  I thought there was no way I could figure it out on my own.  I panicked and contacted the first accountant that I could.  That man spent no more than ten minutes with me, spit out my return faster than you could say “boo”, and happily sent me a bill for $300.  It was then that I vowed to never pay to do my taxes again.

But, you will need to do a little planning and forethought and institute some sort of organizational system in your life.  Again, a little bit of time and effort on the front end of this and this will take up no more of your free time than anything else.

Let me briefly summarize what I think you’ll need:

First, a filing system.  You need to get yourself a cheap filing cabinet, or a few accordion files, because there are certain thing you’ll need to keep up with over the course of the year.  I would start off with all credit card statements, and receipts for any of the following: medical expenses that you are not reimbursed for, all charitable contributions, all job related expenses, all investment information, and anything else you can think of that you might need at the end of the year.

Second, some amount of organization.  Do you know when you should start thinking about your tax return for next year?  Right now?  Three months from now?  The end of the year?  Wrong, wrong and wrong.  You should have already started tot think about it!  As a matter of fact, on January 1^st you should have.  Keeping in mind potential credits and deductions throughout the year and saving corresponding paperwork goes a long way to maximizing your return and completing it a less stressful process.

Guess what?  That’s about it.  Besides choosing which method to use to file them, that’s it. I cannot even begin to put a price tag on how much more I’ve received by doing my taxes on my own.  And this additional income comes from two sources: from maximixing my return and from not paying anyone to do it for me.

You’ll be seeing more posts on this topic shortly.  As always, your comments and feedback are appreciated.

This post may be a bit later than most, but I just finished filing all my taxes for the year.  I am getting quite a nice refund from both my federal and state returns.  Great for me, right?

Well, of course it is.  The first thing I am trying to decide now is what to do with the money.  Invest it?  Take a long vacation?  Stick it under my mattress?

And then I got to thinking.  And this is probably the last “big” thing that I need to do to get my financial house in order.  What I need to do is to make sure that I never get a big refund on my taxes again.

You see, just about ever since I have worked, I have always set it up to where I had the most taken out of my paychecks throughout the year, in order to get this big refund check come tax time.  For the longest time, I just didn’t know any better, but for the last several years, I knew that this was not being financially prudent.

Why?  Because you’re giving the government free access to your money for most of the year.  Yes, YOUR money.  It’s like an interest free loan for them.  I don’t know about you, but I think our government takes more than enough of our money as it is, so I see no reason why I should lend them any extra.  With no interest as well.

To give you a little background, there was a reason why I set things up this way.  I thought that if I could live on as little money throughout the year, that it would help me to be more prudent with my money.  It was almost like I was hiding money from myself throughout the year to ensure I didn’t waste it.

This approach may have been effective in the first few years of dong it, but I have been financially sound now for many years, and I think that I can trust myself with the extra money.  Actually, rather than even trusting myself, I think I have already devised a fool-proof system.

First, I will adjust my withholdings to ensure I am getting the least taken out of every paycheck.

Second, I’ll monitor this the first few weeks to get an idea of how much money were talking about.

Third, I will set up a separate direct deposit from my paycheck to my high yield checking account for the amount of this new windfall.

Fourth, I will start accruing interest on this money throughout the year, rather than it gaining nothing for me.

Exactly what I need to do to adjust my withholdings or how I need to do it-I have not yet figured this out.  Although I am sure it is quite a simple process.  I just need to make sure that I am getting the most out of my paychecks, without taking out so much that I’ll owe at the end of the year.

Of course, if any of you have been through this recently, feel free to comment on the process for my readers.

So there you have it.  I’ll worry about my vacation destination or which mattress to put this money under a little later. Right now I need to work on never getting another one of these big refund checks again.

This is probably the most “off the beaten path” type thing that I use to save money in my everyday life.  Feel free to laugh, poke fun, or comment however you wish.

There is a very simple and easy way to save money on your garbage pickup.  It takes very little effort, and the savings, when tracked over time, can be quite substantial.

Let me tell you a little story.  I was born and raised in Ohio, and back in those good ol’ days, we kept about 4 big huge stainless steel garbage cans in the backyard.  I think it was always my duty to drag those suckers out to the road each Tuesday morning before school.  The garbage men came by, picked up the trash, and the cycle started over again.  The key point here is that this service was included in whatever city or local taxes my parents paid at the time.

In 1985, my family moved  to Florida.  Quite an interesting transition.  Included in this transition was adjusting to new trash pickup.  The system was exactly the same, with one small change.  Shortly after moving in, my parents asked a neighbor which day “garbage day” was.  On the assigned day, we dragged our trash out and surprise, everybody else’s was picked up but ours.  Thinking there was a mistake, we left it there for a day or two.  We did not figure out the problem until another sympathetic neighbor came stopped by to tell us that you actually had to pay for the service to get your trash picked up.

My parents signed up with no qualms.  I mean, really, what else could you do?  This incident kind of stuck with me though.  I didn’t understand.   If our tax money could pay for the service in Ohio, why couldn’t it be paid for in Florida?

Fast forward to the year 2000, when I purchased my first home.  As part of my starter pack or whatever I received, I got all the information and phone numbers to sign up for my trash disposal.  Well, guess where that information went?   In the trash disposal itself.

The easiest and simplest way to save money on trash pickup is to not sign up for the service.  Honestly, are you kidding me?  Pay for trash pickup?  Does anyone else not see the insanity in this?  It currently would cost me approximately $240 per year to have my trash taken away.  I’ll get back to that number in a minute.

Needless to say, I have never paid for it.  I keep several small garbage cans around the house (which is what I assume most households do).  The one in the kitchen fills up just about every day, the ones in the bathrooms a few times a week.  When the bags get full, I tie them off, throw them in the trunk and drop them off at the dumpster behind my office at work.  It probably takes an extra 30 seconds out of my day.

For those that think this is nasty, compare it to the nastiness of having a 100 gallon plastic bin in your backyard that simply fills up with trash every day of the week.  I think I know which if the two scenarios I’d pick.

Simply put, I have saved myself right around $2400 by this method alone since moving into my house.  That translates into right around 3 ½ free mortgage payments for me. 

I hope you’re not still laughing about my silly idea to save money on trash pickup!!

Any and all “trashy” or “non-trashy” comments are appreciated below…

I have done my taxes online for several years now.  The benefits of doing so are many.  At first, I was intimidated by even the thought of doing my taxes on my own, but now it seems like a walk in the park.

Let me outline for you some of the top reasons why you too can benefit from doing your taxes online.

First, you can save time.  Obviously, doing your taxes online can save you time.  You can do them in the convenience of your own home, and on your own timetable.  If you were doing your taxes the old way, and by yourself, just think.  No more filling out schedules and other forms by hand.  And if you were having an accountant do them, no more lugging file folders full of records to an office.

Second, you can save money.  The software (or download) takes you through a guided interview that covers all the topics that apply to you.  You don’t have to worry any more about missed deductions or credits.

Third, somebody’s got your back.  Depending on which version you decide on, you can get worry-free audit support just in case you are ever audited.  Personally, this brought me great peace of mind.

Fourth, it’s easy and simple.  After I purchased my first home, the changes in my financial life were quite intimidating.   And I had no clue how to successfully do my taxes.  That was the main reason for me switching to doing them online.  The process couldn’t be easier.  You are simply asked a structured set of questions that cover all lifestyle changes, and cover all pertinent deductions, exemptions, and credits.  I can’t imagine how much of this I would have missed out on had I continued to do my taxes completely on my own.

 And last but not least, by doing your taxes online this year, you can also get a chance to win an Ipad.  Check out this link to Money Crashers, where they have all the ways that you can win.  Check them out, and good luck with those taxes.

As always, your comments and feedback are appreciated below.

Complete giveaway contest rules, including all the ways to collect entries, are available here.

Well, guess what, it’s that time of year again. Tax season. Am I a little too early for saying this? Well, depending on whether you get a refund or have to pay money, you could be right or wrong. If you get a refund every year, why wouldn’t you want to file as soon as possible?

And, if you consistently have to pay every year, of course, you’ll want to wait to the very end to send them their money, but why not start to prepare now? Who knows, you may find an idea or two here that may take awhile to put into place that could provide for some major savings.

Before I go any further, I do want to let you know that I have a PDF report available for free. It is called “Ten Ways to Save Money at Tax Time”. Until I can get an actual button placed here on my blog, if you’d like a free copy, send me an email or simply comment on this post, and we’ll find a way to get it to you.

And I’d like to give you a quick preview of what is contained in that report.

The Number One way that you can save money at tax time is…….

Do Your Taxes Yourself

Unless you’re self-employed or have a very complicated tax situation, I would imagine that most everyone out there can and should do their taxes on their own. Let me tell you a quick story. I did my own taxes till I was about 35. When I bought my first house, that year I figured that my taxes would need professional assistance. I took them to a friend’s accountant (not a complete stranger, mind you, and I was assured I was getting a discount). He spent all of about 15 minutes on them, and charged me the absurd total of almost $300. It was then that I decided come hell or high water I’d be doing my own taxes from there on in.

And for those of you that take your taxes to those walk-in places, I have no idea how much they charge, but I’d bet that it is rip-off price. And that’s not even including the fee they charge if you’re stupid enough to pay extra money to get your refund check right away. However, I digress.

Let me be clear. Most everyone out there can and should do their own taxes!!! The process is not hard, and it is basically easy to understand. Plus, why wouldn’t you want to have a firm grip on your finances rather than trusting them to someone who doesn’t know your tax situation as well as you do?

Without going on forever, this is what I do and have done for the past 9 years. And I am pretty sure that I have always gotten back as much as I possibly can, and I am pretty sure that I have never broken the law. And I have never been audited.

Get yourself some tax software. There is a wide variety out there; I have used the same one year after year. If you pick one and stay with it, you can save time because it will automatically import your information from your previous year’s return. Be sure to get the version that you need, and price compare it for sure. I have seen some huge discrepancies on price with this software. Of course, they’ll always try to sell you the most expensive version, just read each one and get the one most applicable to you.

After that, it really becomes simple. They give you an “interview” where they ask you lots of questions about your finances for that year. You just answer them and they fill in everything for you. Of course, you’ll have to review it at the end, and fix any errors if they appear, but that’s really about it. They usually offer free audit support as well, if you should ever be audited.

Another thing I will tell you is that a lot of questions that they ask will require a little research on your part if you’re not used to keeping track of tax-related documents throughout the year (this is another subtopic in my free report-getting and staying organized). So, you may want to allow some extra time to do this research. And I would investigate each and every question they ask you to maximize your savings. A few examples.

-How much did you pay in out-of-pocket medical expenses for the year? I would definitely figure out this number. If you are married with children, this could result in substantial savings.

–How much in charitable contributions did you make? Again, think hard and figure this one out. Depending on how much you donate, you can impact your tax burden here as well.

And the list goes on.

Once you go through this process once, you should be able to set up a filing system for the following year that will allow you to track everything during the year as it happens throughout the year. This takes a lot less time than you think during the year, and will save a ton of time when you fill out your return.

In short, do your taxes yourself. It will save you a ton of money in the long run, it will probably take you a lot less time than you think, and it will give you a sense of control over your finances that you probably didn’t have before.

Comment below and I’ll shoot you the whole report for free.

I would like to let you all know of my gratitude and appreciation for your support and readership over the last several months. I know that we are all very busy with our lives and I appreciate you taking the time out of yours to read my words.

I am finally took a major step towards reaching some of my longer term goals. My first book was recently published and is now available for sale at Amazon.com

It is called “Don’t Be A Mule: A Common-sense Guide to Saving More, Spending Less, and Generating Extra Income in Your Everyday Life.” It s based purely on my personal experiences. Namely, the journey that I took from the depths of financial debt to the modest successes that I am experiencing now.

This journey was not a very long one and it was not as hard as I thought it would be. Once I got my mind straight on how I needed to deal with the money that was coming in and going out of my life, it all became pretty basic. Sure, there was some hard work and some sacrifice along the way, but for anyone who thinks that getting out of debt involves years of suffering and foregoing the basic pleasures of life is simply wrong.

The basics that I learned are that it is mostly in your mind. You don’t need huge raises at work to get out of debt; you don’t need to hit the lottery. Honestly, you don’t even need an organized long-term plan. I certainly didn’t have one. If you are deep in debt now, there is a very good reason for it. For most, I would imagine that it is nothing more than living beyond your means. Well, guess what you need to do to solve this? Stop living beyond your means until you are out of debt. Then, you need to live AT your means. Then, you need to work on increasing your means.

If you are in the UK  www.ThinkMoney.com is a useful resource for help and advice on debt.

All of this and more is outlined in my book, and I hope you decide to at least check it out. I think it can provide value to the life of anyone who decides to read it. This journey was the best learning experience I’ve ever had in life, and I think that you can benefit from it too.

Thanks again for your support.

Don’t Be A Mule