Sunday, March 18, 2007

more tax tips

Why do we hate income tax season so much?

I was visiting my hometown on the weekend, and it just so happened that a friend of mine has also been working on her income tax. She moaned about how much she disliked it, so I pumped her with questions, trying to figure out why. Since she's self-employed like I am, I figured she might also have strategies I wasn't aware of.

I discovered that she's already pretty organized: She files her receipts regularly, and keeps them in an order that makes submitting everything to her accountant pretty straightforward. After some probing I realized that what she hates is the amount of time it takes to find, sort, and itemize everything. What's surprising is that she's already doing everything possible to keep the information she needs sorted and in one place.

She uses a well-labeled accordion file for her receipts, and each year she simply has to itemize them. Sometimes she (or her husband) periodically itemizes things during the year, so it's not so much of a chore at tax time.

(Yet she still hates it.)

I love her idea of using the accordion file, and I think I'm going to try it myself this coming year. The system she uses is portable, but you can also find expanding files that will fit in your filing cabinet drawer. Check out staples.ca for details.

Her labels are alphabetical - an older version of the Statement of Business Activities list I mentioned in my previous post. She got it from a past copy of Personal Tax Planning, which is published by the Certified General Accountants Association of Ontario. (It's also available online.) Needless to say, this will only help you if you file income tax in Ontario.

It's a good idea to read through publications like this every now and then - my friend told me she discovered an eligible deduction this year that's going to save her a bit more money.

I don't recommend you do what I do, which is file your own return without an accountant's input. I like the control and challenge of doing it myself, but I may be costing myself money in unclaimed deductions. Get a professional's opinion!

copyright 2007, Michelle Lynne Goodfellow

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