As April 15 approaches, MoneyWatch is publishing daily tax tips. See the full list here, and please check back frequently for the latest advice from our experts.
I've got a tax tip that won't save you any money, but it will save you something far more valuable . . . time. The IRS says the average American spends 21.4 hours completing their 1040 tax return. It's this "hidden" tax -- the sacrifice of not your dollars but your other 8 hours -- that you can reduce. And the good news is this tax tip won't increase your risk of an IRS audit.
Here are three ways to save time filing your taxes:
| 1. Mint.com |
I love this free service. If you haven't heard of it yet, do yourself a favor and check them out. Mint is an online budgeting site for people who hate budgets. They are magicians. Through sleight of hand, your budget will appear with very little effort on your part. But in addition to helping you budget and providing cost-saving offers, the service is brilliant at organizing your financial life. It consolidates all of your savings, investment, credit card, and other financial accounts onto one page.
When it comes time to file your taxes, you can quickly run reports showing your medical expenses, charitable contributions, business expenses, etc. Forget the shoebox because you'll have all of your data categorized and ready to go.
Mint was recently purchased by Intuit, the company who makes Quicken, QuickBooks, and the do-it-yourself tax prep software, TurboTax. Although they wouldn't confirm, my guess (and hope) is that you'll be able to export your Mint data directly into TurboTax -- thus saving even more time.
| 2. Tax Organizer |
One of the most important IRS rules is to keep copies of your receipts, donation forms, etc. If you're like me, organizing all of this stuff is a nightmare. Fortunately, you can save yourself a lot of time and hassle. Here are a few options:
Option 1: Get big box. Write "Tax Stuff" on big box. Dump everything and anything remotely related to taxes into this box throughout the year. Primitive? Yes, but it actually is effective and saves a ton of time.
Option 2: Get a fancy tax organizer. Instead of the dump-everything-into-one-box approach, these organizers have different sections for medical receipts, 1099s, charitable donations, etc. Google "tax organizer" for more info.
Option 3: Go digital. Scan all of your documents into PDFs on your computer. You can then use a program such as FileCenter to easily and efficiently organize the files. When it comes time to do your taxes, everything is ready to go.
| 3. Outsource |
Hire a CPA to do your taxes. This will undoubtedly save you time, but because you still have to be somewhat organized, I'd still recommend Mint and/or a tax organizer. Is it worth the cost? In addition to saving time, a good CPA should also be able to make strategic recommendations that can save you money.
If these time-savings tips are not sufficient, you could always move to Dubai, which has no income tax.
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(Clock image by zoutedrop, CC 2.0)