Taxes and Tax Information

If you are already suffering from a major depression, you may feel even more overwhelmed than the average person when it comes to paying your taxes.

Why? Well, paying taxes can be a long, time-consuming task that requires attention to detail and being on time. That can be stressful for anyone - but for someone who is depressed it can sound almost impossible.

Depression has been described by many sufferers as like a heavy weight on the spirit. You are tired. Unmotivated. Uninterested. If you can’t get up to take a shower, how on earth are you going complete your taxes? Well, you absolutely have to file your taxes right? So here are some ideas to help you through the process…

1. Decide what you are up to doing. Can you go out and work with a company (like an H&R Block) to help complete your taxes. Or could you order a tax software such as Turbo Tax over the internet and complete your taxes yourself.

2. Whichever method you choose, you need to have your information organized. So on a good day, ask someone you trust to help you sort through your receipts and paperwork. Getting all your piles organized and ready will really give you a head start on completing your taxes.

3. Without putting too much pressure on yourself, make dates or appointments to work on your taxes. A day for compiling information. A day for filling out forms. A day for checking and re-checking everything. And then the final date to mail them off or file online. Commit to the dates you set.

4. But if things are really bad for you right now, there should be a relative or close friend who is either an accountant or thinks they are one:) and can file for you.

5. Finally, always be proactive in defeating your depression. Visit your physician. Be open to new treatment methods. Exercise. Try to combat the symptoms or at least lessen the severity of them so that you can go tackle the things you need to accomplish in order to live your life.

Quick Tip: Try to tackle your tax project after you have exercised, because exercise has been to shown to elevate mood. So its naturally and biologically the best time to start!

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Lisa Angelettie, “GirlShrink” is a psychotherapist, author, and online advice authority. Visit her at http://www.GirlShrink.com and learn about her exciting Relationship 911! Program - http://www.girlshrink.com/911intro.html

You can also grab the FREE report “3 Simple Ways to Save Your Relationship from Sabotage!” instantly when you go to: http://www.girlshrink.com/better_choices.html

2006 GirlShrink Inc. The author grants reprint permission to opt-in publications and websites so long as the copyright and by-line are included intact and the article is not used in spam. A courtesy copy of your publication would be appreciated.

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Does this scene sound familiar? It’s April 7. You haven’t seen the top of your dining room table in two weeks because of the piles of paid bills, receipts, canceled checks, and unidentified cash register receipts covering it. Your head pounds and your stomach churns as the countdown to April 15 begins.

You might hate to pay taxes, think the system is unfair, dislike the forms, and even stage a mini-tax rebellion, but in the end the tax man cometh - with penalty if you’re not careful! The key to your survival is taking an organized approach to this unavoidable task.

There are really two issues here. Number one, of course, is getting the information together for this year’s tax return. Number two is developing a strategy, which will eliminate the panic you’re feeling now next year - and now is the easiest time to do that too. Consider these tips:

• If you use a tax advisor, make an appointment to get together well before April 15. For the future, do it before the end of the tax year, and you may be able to save on your tax bill.

• Designate a specific, easily accessible place to keep all the information relevant to your tax return.

• Pay tax-deductible items by check or credit card whenever possible. If you have many tax-deductible items, get a separate credit card for those expenses.

Now, for this year:

Step 1: Collect all the records you can find: canceled checks, credit card receipts and statements, canceled checks, cash register receipts, calendars, and any articles or other information you may have collected with information about what you can deduct. (Use Post-it? Flags to highlight important information.) If you’re not sure, discuss with your accounting the critical information to include with your tax return, including documents to support any wages or other income received as well as mortgage interest paid.

Step 2: Separate all the papers into appropriate categories. Put each one into a separate container - large envelope, plastic basket or shoebox. Labeling each category with a Post-it? Note will make it easier to adjust your category names if you change your mind as you proceed. Since you will probably need more than one sitting to complete your taxes, these labeled containers make it easier to clear your work area, if necessary, and to find your place when you are ready to continue.

Step 3: Take one category at a time and eliminate (or staple together) any duplicate receipts. If you need to correlate your expenses with your calendar in order to prove tax-deductible expenses, such as in the case of entertainment, put all receipts in chronological order to speed up the process. (Use a different color Post-it? Flag for each deductible category.)

Step 4: Now you are ready to begin entering the information on the tax forms, into your computer program, or to take the information to your accountant. (Many accountants will provide a worksheet of compiling information.)

Once you’ve finished filing your return, the next consideration is how long to keep the material you’ve collected. The simple answer is to keep whatever you need to persuade the IRS that everything on your return is accurate, and hang on to the evidence for as long as the IRS has the right to question your return. But I’m sure you wanted a more practical answer!

Ordinarily that’s three years from the due date for the return, including extensions, to assess any additional tax. But a return can be audited for six years if the IRS suspects the taxpayer has neglected to report substantial income. If fraud is suspected, there is no time limit.

Your record keeping system doesn’t have to be elaborate or sophisticated. What is more important is to have a system - and the discipline to keep it up to date.

Make sure to keep tax information separated by year. If you have a minimum amount of back-up material, one file folder may be sufficient. Staple together all information for each itemized deduction. Label it clearly with a Post-it? Note. Otherwise, use separate file folders or envelopes for each category. If you run a business and have a very large amount of material, use one storage box for each year. Make sure to label the outside of the box! Put all boxes together. As you put in this year’s box, you can remove the box with information you no longer need to keep. Sorting your back-up materials will be easy to do right after you filed this year’s return when the categories are fresh in your mind. If you are audited, it will be easy to provide documents to support your tax return.

In addition, consider these tax tips:

• If you write off the cost of a business car, keep the logbook in which you recorded your trips as well as evidence of the costs you incur.

• If you claim as a dependent someone who is not your child, keep a separate file for the evidence that shows you provide more than half of that person’s support.

• Keep information that relates to the purchase of all homes at least six years after the sale of the last house. This includes your title, deed of purchase, and information about your home’s purchase price, sales price, capital improvements and repairs.

© Barbara Hemphill is the author of Kiplinger’s Taming the Paper Tiger at Work and Taming the Paper Tiger at Home and co-author of Love It or Lose It: Living Clutter-Free Forever. The mission of Hemphill Productivity Institute is to help individuals and organizations create and sustain a productive environment so they can accomplish their work and enjoy their lives. We do this by organizing space, information, and time. We can be reached at 800-427-0237 or at www.ProductiveEnvironment.com

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As everyone in the U.S. knows, we have just passed one of our most “favorite” times of the year: income tax season. If you are going to create and sustain wealth, it is inevitable that you will have to address your personal tax situation.

By “address,” what I really mean is take control. This is true whether you live in the U.S. or just about any other country. Agree or disagree with the “fairness” of taxes, this is a subject that you must obtain some basic understanding if you want to significantly increase your wealth.

Before I start, let me say that I am certainly not a tax expert. And space does not permit going into detailed tax strategy. The purpose of this article is to explain why it is so important for you to take up the study of basic tax law and strategies, and even more important seek out the advice of a true tax expert.

Why is it important to understand taxes?

In most cases, taxes are your largest expense. This is probably the key reason that wealthy people spend so much time, effort, and money doing their best to minimize their tax expense. Depending on your tax bracket, your federal taxes may be as high as 28%-35% of your income! And then there are social security, state income taxes, property taxes, sales taxes, etc., etc. If you are generating all of your income from your wages (earned income), you may be lucky to actually keep 50% of what you really earn.

That is a staggering figure when you think about it. That means that if you have a salary of $50,000, you may be only keeping $25,000 of your earnings for your own purposes.

If you think I am exaggerating, pull out your last paycheck and look at the tax withholdings for taxes that have been taken off the top of your earnings. If you take your net earnings and divide them by the gross earnings, what is that percentage? Don’t be shocked if it isn’t about 40%. Then take a look at your sales taxes. In California, the sale tax is around 8.25%. So just doing a quick estimate, I’m already at about 48% in tax expense (assuming most of the money is spent on taxable items).

The cost of ignoring your tax expense and not doing everything legally possible to minimize it is huge. Of course, tax law can be exceedingly complex, and the penalties of making a mistake are high. So a large number of people, simply accept this large tax expense as inevitable. They concede defeat without really even trying to take any type of action to minimize the impact.

What are some actions that you can take?

1) Recognize that you can take action to reduce your tax expense. Too many people blindly assume that it is impossible to significantly reduce their tax expense. Either they think it is too complicated, too much trouble, or they are afraid that if they take deductions that are legitimate, that the government will come after them. If you assume there is nothing you can do (learned helplessness), you are right. If you assume you can improve your tax position, you’re right. The fact is that while you must pay your legal share of taxes, the government actually wants you to take advantage of tax deductions and credits. That’s why the laws were passed to allow for them.

2) Make a commitment to study basic tax law so that you have at least enough knowledge to speak with a tax advisor with a certain degree of intelligence. You can’t take deductions that you are not aware of. Because of the potential savings, the study of tax law needs to be a fundamental part of your financial literacy education. Your two highest priorities must be to create wealth in the most efficient manner and protect it. And any protection strategy must include protecting it from over taxation. Don’t just limit your study to books. Also seek out college classes, night-school, and seminars. But be careful of seminars as they can be a lot more expensive and not as thorough as a class from a community college.

3) Seek out a CPA and/or Certified Financial Planner to come up with a long range plan to minimize your taxes and increase your wealth. Start with the most experienced person you can afford and plan to pay for even more expert advice as your wealth increases. Ultimately, it will probably be less expensive to pay for outstanding advice than to over pay on your taxes. If you wait until tax time to come up with your plan, you have waited too long.

4) If you haven’t already, start keeping detailed financial records. This is a good habit to get into even if you don’t yet have a business. If you keep detailed records (using a computer program!) as you go through the year, it makes it much easier to turn over your records to your tax preparer when tax time comes.

5) When you record your income from your paycheck, be certain to record all deductions taken from your check. Don’t just record the net. If you actively track your tax expenses deducted from the top of your wages, you will be more motivated to do everything possible to legitimately reduce that expense. If you simply record the net wages, you have probably fallen prey to the tax trap without a fight.

6) If you are an employee, make certain you are taking full advantage of your 401k and medical flex spending plan if available. Money set aside for your 401k (usually matched by your employer) helps reduce your taxable income. You have to pay taxes eventually, but hopefully by the time that happens you will be in a lower tax bracket. Medical flex spending plans help you pay for medical costs (including over-the-counter medicines, dental work, glasses, etc.) using pre-tax dollars. Flex spending plans are also available for child day care.

7) As soon as possible, replace your income from wages with income from your own business and unearned income from investments. Of course, this is easier said than done, but the benefits are huge. If your income comes from a business that you own, it’s much easier to pay for expenses with pre-tax dollars. Obviously, you have to have a real business (not just a hobby) and the expenses must be legitimate business expenses, but this allows you to have a lot more flexibility in your tax planning. Realize that you can (I would say must) still start a business even if you have a full-time job. If you want to create great wealth (and minimize your tax expense), don’t let fear, unbelief, or lack of knowledge prevent you from starting your own business. You must take action to overcome those obstacles.

Eventually, you need to target making the ultimate shift to getting your income from unearned income rather than wages. Unearned income is taxed at a lower rate than earned income. That’s one of the ironies of our tax law: the more income that is “unearned” the lower your tax expense.

Some Power Affirmations Related to Helping you Take Control of Your Tax Expense

1) I am now in confident control of my tax expenses.

2) I have a clear understanding of basic tax law and strategies.

3) I regularly seek out sound tax advice from seasoned professionals.

4) My unearned income from investments is increasing everyday.

5) I record all financial transactions regularly and take advantage of every legitimate tax deduction.

6) I now take maximum advantage of my employee benefits including my 401k and flexible spending accounts.

7) I pay as many expenses as possible with pre-tax dollars.

8) I enjoy studying basic tax law, because I enjoy the savings my knowledge brings.

9) I am absolutely committed to increasing my financial intelligence everyday.

10) I now take full advantage of every legal tax deduction available to me.

11) I track my tax expenses and take every action possible to minimize that expense.

12) By studying books, taking college-level classes, and attending seminars, my financial intelligence is increasing everyday.

Copyright (c) 2005 Bill Marshall - All rights reserved. Feel free to republish this article provided you include the copyright information and the weblinks where possible.

For practical self-improvement tips, visit http://www.poweraffirmations.com. Get my new free e-book, “Power Affirmations: Power Positive Conditioning for Your Subconscious Mind”

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