Best Results Organizing

I confess–I love greeting cards. While shopping for my sister’s birthday card in February, I saw three cards perfect for Paper Mommy‘s birthday in April–two suitable for public display, and one that will send her into paroxysms of private giggles. (Even professional organizers have areas of “aspirational acquisition”.)

According to the Greeting Card Association, U.S. consumers purchase approximately 7 billion greeting cards each year. Another 700 million are sold in Canada. That’s a lot of cards! In fact, that’s about 128,000 tons of paper and 3 million trees!

Paper Doll readers may recall that we’ve covered greeting card strategies before–we focused mainly on how to cope with letting go of them. I’ve never counseled eliminating greeting cards, however, because a carefully-selected card with a heart-felt, handwritten message has the power to uplift, motivate, and comfort in a way that an email often cannot. Most of us find that the cost (financial and environmental) is outweighed by the intended emotional impact of sending a card to a friend or loved one.

Now, some new, inspired products have developed a way for you to to feel comfortable with buying and letting go of cards, while helping the environment a teeny bit, as well.  If greening your greetings appeals to you, check out these options.

At the 2010 Green Products Expo in New York City a few weeks ago, one cute entry presented a new way to recycle and reuse greeting cards.

regreet™ uses labels and special mailing supplies to give new life to your previously-received (OK: used) greeting cards, while saving money (on new cards) and saving the planet.

regreet™ doesn’t make cards, per se. They actually create a Greeting Kit, which includes all the components (made with recycled materials, of course) that you need to reuse/repurpose greeting cards, including:

4 journey labels
4 signature labels
4 sheets of notepaper
4 envelopes

The Greeting Kit also includes four “hop along” sets (get it? frogs…hop? Too cute!) with the same contents as above. With each card you send, you include a “hop along” set to enable cards to go on future journeys. (You can also buy regreet™ single sets, with one label each for journey and signature, one piece of notepaper, one envelope and an instruction sheet.)

To start a card you’ve received on a new journey, apply an adhesive-backed signature label over what the prior sender wrote, and use the matching notepaper if you want to write more. Then affix a uniquely-coded journey label to the back of the card. Put the card and “hop along” set into the regreet™ envelope, and mail it off.

For an added twist, they’ve designed “journey codes” so you can track where your card travels over time. When you enter the code from the back of the card, you’ll see a mapped tour of the card’s journey to you (if you didn’t originate that card’s journey) and each successive trip, with a summary of miles. You can even click to see the city, state and zip code, plus date received, for each trip, and the miles traveled on each hop.

OK, so there’s a bit of a privacy issue, especially if you know your friends’ friends’ zip codes. If you send your best buddy a card via regreet™, but find she eventually re-regreets it to your high school frenemy, will you feel betrayed? Would you still be proud of your spouse for saving the environment if you learned he/she sent a birthday card to a a long-ago ex? Well, Kermit did say it’s not easy being green. But, if you’re green and confident, regreet™ may be the way for you to go.

regreet™ donates a portion of profits to charitable organizations. This year, their non-profit partners are Susan G. Komen for the Cure, 4H, and the Nature Conservancy. You simply enter the Direct the Donation code from the back of your regreet™ Kit on the donation screen and select the non-profit from the drop-down menu, and your vote, collected with others, determines the proportion of profits that go to each charity.

Last week, Lisanne Oliver, Australian professional organizer, author and blogger, helped spread the word regarding recyclable cards from Australian card-maker Merry-go-round.

The Merry-go-round cards aren’t just green, but gorgeous. Their designers are well-known Australian children’s book illustrators with a collective warm sensibility that melted even mean old Paper Doll‘s heart. Of these artists, Merry-go-round says:

Take a peek below and visit the artists’ page to click on the thumbnails of these limited edition cards and to get a closer look.

(Via Merry-go-round)

The cards are designed with slits (you know–tab A goes into slot B) to attach your message, written on a separate piece of paper. Your recipient, once he or she has marveled at the loveliness of the card and the pitch-perfect sentiment of the message, can keep the words, but recycle/reuse the card by replacing your message with a new one for a new recipient. Every card includes two message slips to get you started, and instructions on how to make more and continue to reuse the card.

So, you send your daughter a card of congratulations for graduating middle school. She tucks your message in her box of secrets (hidden where she thinks you’ll never find it), and sends the card on to a friend, with her own message, written in that disemvoweled text-speak so popular these days. And so on…

The cards are green from the get-go, using uncoated 100% post-consumer recycled paper stock via a manufacturing process that would make the greenest heart swoon: Process Chlorine Free (so no nasty chemicals in the bleaching process), production-related waste water is recycled and cleaned, they use natural gas to power the process, and manufacturing waste is recycled into good stuff like fertilizer and cement.

The beautiful cards can be purchased online, directly from Merry-go-round, in sets of six or as individual cards (or sets of four of the solo designs). The time management aficionado in me adores Slow Down, but all you parents might get a particular warm fuzzy out of The Kiss. (Please do share your favorites of any of these cards in the comments section, below.)

Of course, if you eschew online stores and prefer to stand in a card shop and “take inventory” (as PaperMommy says), perusing and comparing each card to the next, be prepared to travel. Merry-go-round cards are not sold in North America and are available only through Australian and New Zealand vendors…but I bet if we spread the word, distribution will grow wider.

According to Lisanne, who has already had the opportunity to send a card, there are little heart-shapes on the reverse of the cards. These are apparently designed to let you color in a heart each time the card is used to track the number of lives it has had. This allows users to swell with pride at their part in the chain of eco-sustainability without risking the jealousies inherent in the journey code tracking above.

I should note, regreet™ isn’t the first trackable card, nor has Merry-go-round cornered the market on reusable cards.  Our neighbors to the north have that distinction.

Slingshot Cards bills itself as the “World’s First Reusable and Trackable Greeting Card”. First, the cards are FSC-certified and made of post-consumer recycled cardstock. (They’re made much like the Merry-go-round cards, but with wind energy to power the manufacturing.)

Next, the cards are hand-finished to include hemp fiber SlingShot strings (to hold the message inserts in place). Each card comes with two blank inserts–one for the buyer to write to the first recipient, and one for the first recipient to pass on. To keep the cycle going, Slingshot Cards provides MS Word and PDF versions of their Greeting Template (from which you can impart your own message), but you could also slide photos, newspaper clippings, coupons or anything else under the SlingShot strings:

Each Slingshot card has its own tracking number. When you get one of these cards, visit the tracking page, enter your card number, and then your name, plus a general location (city/state/country), occasion and date received. (In a world where people declare their exact locations on FourSquare throughout the day, Paper Doll is probably woefully old fashioned in suggesting you replace your real name with a privacy-protecting nickname or non de plume…but that’s just the way I roll.)

Slingshot has added an email notification system, so that you can get a message each time a card you’ve registered arrives somewhere else, and Slingshot’s goal is to have every card make 20 separate journeys.

You can shop Slingshot’s online store (remember, these are Canadian dollars!) for individual cards or 4- or 8-pack sets of outdoor and nature themed cards. (Paper Doll is a fan of the lighthouse, beach and sunflower themes.)

Five percent of Slingshot’ profits go to The Fruit Tree Planting Foundation, an international non-profit focused on fighting hunger and improving the environment.

So, if you also love sending greeting cards — Paper Doll‘s birthday is coming up in just a few weeks — get going on greening those greetings!

For solopreneurs, IRS Form Schedule C, Profit and Loss From Business, is used to report all of your revenue and expenses. It’s fill-in-the-blank: “Hey, I earned this! Hey, I spent this!” As long as you don’t turn it into a MadLib with crazy, non-deductibles, there’s nothing to fear.

When you are the business, it’s not all that hard to know what papers you need to save to keep the tax man happy. If a piece of paper relates to money that came in or money that went out, there’s a tax category for it. If you know the categories and put in minimal time each day (seriously, making a Hot Pocket takes longer), tax paperwork need not be stressful.

There are two separate elements to dealing with your business finances. First, you need a plan to deal with the paperwork–the receipts/proofs of purchases. Then, you need to decide how and when you’ll cope with the collection and interpretation of the information from the paperwork. The IRS wants to know how much you spent in specific categories, so each little receipt or credit card statement line is worth money to you in terms of potential tax deductions. So, don’t think of the tax paperwork as boring…think of it as bits of treasure.

At the most basic (but least efficient), you could throw every business receipt in a box until tax time, then sort by expense category, then put on your green eye shades and tally up the totals on your abacus or adding machine in order to enter the figures on your Schedule C. And if this were 1977, it would be fine and dandy, though still heavy on the end-of-year labor.

Modern marvels of software, from Quickbooks to the free, online program Outright, can help you keep track of your income and expense data with a minimal learning curve. If you don’t want to learn how to work with new programs, you can create your own little program using a spreadsheet, with rows to record each transaction’s date, purchase method (check #? cash? credit card?), revenue or expense information and amount. Then, make each column correspond to each category that has to be reported to the IRS, and just add up each column. You don’t have to know even the teeniest bit about double-entry bookkeeping–it’s more like playing Business Bingo!

Set a task bar alert or alarm for a specific time/day each week to record what you took in and spent (and in which categories), and maintain a folder for any of the following Schedule C categories that apply to your business. Keeping the paper categories separate will help you track expenses over time and ease any decisions you need to make, either for taxes or general finances. Doing the math on an ongoing basis keeps you aware of your business operations and eliminates the fear of tax time.

Income

Gross Receipts and Sales–Not everyone will send you a 1099 for work you’ve done, so it’s essential to keep track of your own income. The easiest method is to deposit all income into your business checking account (remember, don’t commingle business and personal finances!) and then keep a copy of your written deposit slip or, if you’re using one of the great new OCR ATMs, the photocopy deposit slip showing the actual checks and/or cash you deposited.

Returns and Allowances–Did someone return a product you sold? Did you give a refund because of a satisfaction-guarantee policy? Save written documentation so you don’t end up paying taxes on revenue you didn’t get to keep!

Expenses

Advertising–Don’t just think in terms of newspapers, magazines, radio and TV. Remember to include costs for business card and brochure printing, promotional items, phone directory ads, pay-per-click web fees, catalogs, event sponsorships, fees paid to public relations specialists and anything else that gets your company some attention!

Car & Truck Expenses–When you start using a vehicle for business, you decide whether you want to take actual expenses or mileage expenses. If the former, you’ll maintain receipts for fuel, oil changes, repairs, tires, insurance, etc. If you go with mileage, you’ll need to know the year’s starting and ending odometer readings, and maintain a mileage notebook (or smartphone app) to keep track of all business-related miles driven. The number of business miles driven in a year is multiplied by that year’s IRS mileage rate–for 2009, it’s 55 cents/mile.

Even if you’re using the mileage method, you get to count parking fees and tolls. You’ll have to go through the toll attendant line to get a receipt, adding another 20 seconds to your day, but the money does add up. Request receipts for parking fees, and make a notation of where you were (if it’s not obvious from the receipt), with whom and why. If you often need to park at meters, develop your own little record book that you can keep in the console or glove compartment.

Commissions & Fees–Do you pay for referrals? Do you have salespeople working on straight commission? Be sure to keep detailed records of whom you’ve paid, when and for what, so you won’t have to depend on your memory next April.

Contract Labor–Did you hire a sub-contractor to help with a big job or you pay a teenager to distribute flyers for your company at a local event? Remember, for contractors whom you paid more than $600 for contract work, you’ll need to provide a 1099-MISC to them and to the IRS.

Depreciation & Section 179 Expense Deduction–This is where you break down a huge purchase into the allowable deductible portion. Let’s say you bought a piece of equipment for five zillion dollars. You can’t deduct all 5 zillion in one calendar year, so you need to keep track of the allowed deductible portion, each year, until you’ve fully deducted it. Don’t let the formal-sounding “Section 179” scare you–it’s just a way to allow small businesses to purchase “tangible, depreciable, personal property which is acquired for use in the active conduct of a trade or business” and deduct expenses in the year of purchase, rather than amortizing it over time.

Employee Benefit Programs–If you pay for accident and health plans, group term-life insurance or dependent-care assistance programs for your employees, whether you pay annually or on any regular or irregular schedule, keep the paperwork that shows when you paid and for what.

Insurance (Non-Health)–Do you have business insurance, including policies for errors and omissions? Keep records of the premiums you paid.

Interest–This category includes expenses paid for business mortgages and loans, as well as business credit cards. Here’s yet another great reason for completely separating your business and personal expenses. If you place business expenses on a business credit card (one on which you make no personal charges), interest is deductible. If, however, you charge all of your business expenses on a card you also use for household expenses, the interest is commingled and the IRS will cast a big old frowny face on your deductions. Keep those finances separate!

Legal & Professional Services–Did you hire an attorney or CPA, or pay for a logo design or web site creation? Keep copies of charges and proof of payment.

Office Expenses–This category is for all the cool Sharpies and Post-Its, as well as postage. If it’s a necessary expense for your administrivia, for writing with (pens, pencils, cool markers), writing upon (copy paper, stationery, notepads), sticking things together (staples and staplers, tape, glue) or tearing them apart (staple removers), make sure receipts go straight to your wallet and that they get removed when your data entry alarm goes off.

Pension & Profit Sharing Plans–Did you contribute to a pension, profit-sharing or annuity plan for employees? Maintain monthly records. (However, you’ll put contributions for your own retirement directly on your 1040.)

Rent/Lease of vehicles/machinery/equipment and/or property–This applies to property or space other than your home office. If you rented office space, get your landlord to provide either a monthly receipt for payments or an annual summary in writing.

Repairs & Maintenance–This is where you keep receipts for “incidental” repairs, not for remodeling or anything that adds so much to the value of your space that you’ll have to amortize it over time.

Supplies–Keep receipts for anything you purchased for use in order to do the work of your business, per se, rather than the administrivia or paperwork.

Taxes & Licenses–Do you pay for an annual business license for your city and/or county? Whether it’s a flat fee only, or a fee plus a tax as a percentage of your gross revenues, you’ll want to maintain a record of what you paid. This category also includes state and local taxes you paid, including business-related property and payroll taxes. If you collected taxes from customers, the amount you collected (and were paid) will go under your income category, but will be offset here. Don’t forget licenses required by your state and/or profession or trade.

Travel, Meals & Entertainment–This is a huge category; entire books are written on this topic. The basics, however, are that travel expenses (other than food and entertainment) are fully deductible as long as they’re business-related, but meals and entertainment are generally deductible at only 50%. So, if you fly to a conference and stay overnight for a week, your airfare and hotel will be deductible (as will be tips to housekeeping, dry cleaning, late hotel check-out fees, rental cars and airport shuttles, and various incidentals you wouldn’t have to pay if you were snuggling on the couch at home). However, that $200 dinner you bought for yourself and your big client? Only $100 is deductible (and only half the dinner tip, too). I guess the IRS figures you have to eat, wherever you are.

Utilities–This is where you need to keep track of utilities related solely to your business. (If you have a home office, expenses like electricity will have been factored on Form 8829.) Also note that many digital tax preparation services, like TurboTax, tend to refer to “Communications” as a separate category, although they assign the totals to the Utilities section. Be sure, whichever method you use, not to include these items twice. Remember to take note of what you spent for extra landlines (beyond your primary home line), voicemail and other phone services, cellular service, internet service, data packages for mobile devices and any other communications-related expenses.

Wages–If you have actual employees, rather than contract labor, keep very careful track of payroll wages (plus FICA, Medicare and FUTA) for entry in this category. If you use a payroll company, they should provide you with summary data for each payroll period, as well as an annual total.

Other–While we professional organizers tend to avoid unlabeled categories, this is a good place to put items for which the typical solo professional might be saying, “But hey, where’s the category for…?” Although Schedule C doesn’t make a separate category, there’s no reason you can’t create separate files for each major “miscellaneous” category you need, including: continuing education expenses (conferences and seminars, ongoing or one-time-only classes, educational resources), business gifts, outsourced business services (printing, photocopying, binding, virtual assistants), etc.

There are a few other types of expense paperwork a typical self-employed person will need. If you qualify for the home office deduction, you’ll need to have a handle on both office-specific expenses and household-wide expenses (like rent/mortgage, utilities, etc.) for a percentage equivalent to the percentage of space in your home that the office encompasses. This is yet another reason why Paper Doll encourages you to maintain an organized Family File system. For more information, check out the categories on Form 8829 (Expenses for Business Use Of Your Home)and the detailed instructions.

Did you know that self-employed people can deduct up to 100% of their health insurance premiums? Don’t just think, “Oh, I just paid my insurance premium. It was X. I’ll multiply that by 12.” Rates tend to go up annually, and also tend to increase when you age out of a particular age-group category, so you may have paid two or three different monthly premium amounts in any given year. Check your statements!

So, set a reminder alarm or start each business day by entering the previous day’s income and expenses by category. You’ll have greater mastery over your business finances, and you’ll be amazed at how quickly you will finish your taxes.

Last week, we talked about the information return documents (W-2s, 1099s and 1098s) that delineate how much money you’ve received (from employers, financial institutions, etc.) and how much you’ve paid (either directly or indirectly) in various federal and regional taxes. But that’s just the beginning of your paperwork.

Then there are documents you received (and should have saved) as a result of some kind of transaction–receipts or records essential for completing personal or family taxes. Today’s post reviews which documents you should locate to complete your 2009 returns, and which you can begin collecting to make next year’s tax preparations even easier.

But first, do you have everyone’s Social Security cards? Sure, you’ve probably had your own number memorized since you took the SATs, but are you certain you know your spouse’s number? Your children’s? The elderly relative for whom you are the sole support? If you pay alimony, do you know your ex-spouse’s number?

A major cause of audits is a mismatch between information provided to the IRS by third parties (e.g., via W-2s and 1099s) and that provided by you. If a Social Security number is off by even one digit, it impacts not only your likelihood of being audited, but also your earnings history, and therefore, your eventual benefits.

So what documents do you need? There’s financial proof that is (or should be) delivered directly to you via some kind of correspondence and proof that you must retrieve at the time of a transaction, for various categories:

• Your Health

Medical insurance company summaries of out-of-pocket health expenditures for last year might be a goldmine if your family’s medical expenses were high. Unlike miscellaneous deductions, which need only combine to 2.5% of your adjusted gross income, medical expenses must exceed 7.5% of your AGI to be deductible–otherwise, you’d just take the Standard Deduction.

If your insurance company doesn’t automatically mail monthly or annual summaries, call to find out if there’s a way to log into your account to access and print a 2009 summary (and save you a lot of math). If not, you can usually use the “You Owe” column of the Explanation of Benefits your insurer sends after doctor’s visits, hospitalizations and procedures. This will give you a handle on which receipts or dated statements you’re seeking.

Be vigilant about saving medical expense receipts, as your EOB’s and insurance company summaries are not legal proof of what you spent on deductible medical expenses, only indications of what you owed to medical providers. Collect receipts for:

–Traditional medical expenses–Be sure you’re counting only medical expenses you paid and not portions paid by the insurance company or in the section on the Explanation of Benefits generally referred to as network savings. (That amount isn’t something you paid, or even something paid by the insurance company. It’s the amount knocked off the bill simply because you have insurance. If you were uninsured, you’d be charged more than the combined total normally paid by you and the insurance company. Oy!)

–Pharmaceutical expenses–Did you know you can call or go into your pharmacy and request a printout of all pharmacy purchases you made for yourself or your children? This is a major organizational advantage of using only one pharmacy–one printout. Because of privacy laws, your spouse may have to make a separate request.

–Health Savings Account documentation–For every qualified medical expense you pay through your health savings account (HSA) or medical savings account (MSA), it’s essential to keep a record of the name and address of each person or company you paid and the amount and date of the payment. Since HSAs can be used to cover everything from orthodontia and acupuncture to durable medical equipment and contact lens solution, be sure to save your receipts, and if a receipt doesn’t clearly describe what you actually purchased, make a note at the top to ease your labor at tax time.

–Medically-necessary travel expenses–Did you know that if you (or a family member) have conditions that require travel for treatment, you can deduct the travel costs? Either keep a log of the miles you drive your car for medical purposes and use the standard mileage rate, or, if you have a penchant for minutia, you can record gas and oil expenses directly related to any medically-necessary travel.

• Your Home

Home purchases–This year, with so many taxpayers taking advantage of the $8000 First-Time Homebuyer Credit, the issue of home purchase record-keeping is especially important. Be sure to maintain records regarding the purchase (or sales) documentation for a house, as well as records for closing costs, home inspections, fees paid to real estate agents and any records regarding private mortgage insurance.

Casualty and theft losses require documentation. For thefts, you’ll need to have proof of ownership (that’s why we recommend saving “big ticket” item receipts and videoing a household inventory), proof of theft (usually via a police report) and the date that the item is believed to have been stolen (to be sure it falls in the appropriate tax year).

For proof of loss due to casualty, you’ll want to maintain insurance company confirmation letters regarding the date and cause (ice storm, lightning, fire, auto accident, etc.) of loss, estimates of original costs and costs of repair/replacement vs. what your insurance company will or will not pay (or has paid), and proof of ownership.

Moving expenses relate to actual costs (movers, truck rental, storage, etc.) and mileage. Did you move more than 50 miles in order to work at a new job location? Check out IRS Publication 521 regarding what you’ll have to document.

Other home-related paperwork to save:

–Receipts and records regarding any home improvement efforts you’ve made which materially increase the value of your home (which will have a tax implication when you sell)

–Records of purchases for your primary residence that qualify you for the Energy Star tax credits this year–This gives you credit for 30% of costs up to $1500 worth of energy-efficient purchases, including biomass stoves, various heating/air conditioning devices, insulation, water heaters and windows and doors.

• Your Heart (Loved Ones and Philanthropy)

Childcare/Eldercare costs–To take advantage of the Child (or Dependent) Care Credit, you’ll need documentation of the name, address, and Taxpayer/Employer Identification number for any care provider you’ve used for your kids or other dependents. Whether you’re using a babysitter from down the street or employing the services of a daycare facility (for either children or adults), use federal form W-10, Dependent Care Provider’s Identification and Certification.

Plus, even if you’re not planning to run for elected office, be sure you’re not running afoul of Nanny Tax requirements regarding FICA (Social Security and Medicare) and FUTA (unemployment insurance). Keep records of what you paid (and when), what you withheld and what you submitted to the IRS.

Confirmation of donations from charitable agencies–You may get a nice form letter on the non-profit’s stationery, or they may bury your acknowledgment as tiny text in asterisked comments at the bottom of requests for further donations, so you really do need to be diligent about opening your mail. A confirmation should include the name of the qualifying charitable entity, a date of donation or at least the date of the acknowledgment (i.e., something to prove the tax year of the donation) and a dollar amount or a description of materials, if an “in-kind” (non-monetary) donation was made.

Not every charity confirms donations in writing. In past blogs, I’ve noted that for your protection, you should keep a “Tax Prep-Charity” folder into which you put documentation of any donations you make. If a charity sends you requests for money and you return a check or credit card authorization with the payment stub, use the rest of the page to mark the date, dollar amount and method by which you paid (check number or credit card name), and file it away.

• Your Head (Hobbies, Jobs, and Education)

Education expenses can be deducted in a variety of ways too numerous (and complex) for this arena–and then there are credits (the Hope Credit, the Lifetime Learning Credit, the American Opportunity Credit), Savings Bond programs and more. In addition to keeping your 1099-T (for tuition) and 1099-E (for educational interest), be sure to maintain transcripts that show your periods of academic enrollment, as well as canceled checks, credit card statements or other receipts that verify the dates of purchase and amounts you spent on tuition, books, lab materials, student fees, etc.

Notice of gambling or lottery winnings should come via W-2Gs, but even if a casino or lottery agency doesn’t send you a notice, you can be sure the government knows about your winnings. They certainly don’t know about your losses, however, which is why, if gambling is a big part of your lifestyle, you’ll want to keep a diary of your gambling losses to offset your winnings.

To deduct your losses, the IRS requires that you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses. They’d like your diary to include the date and type of gambling activity, the name and address where you gambled (apparently “Joe the Bookie” isn’t going to suffice), names of persons present and amount you won or lost. Paper Doll doesn’t imagine that the personality attributes for gambling aficionados and those for detailed diary-keepers would dovetail, but hey, I’m just here for the organizing.

Un-reimbursed employee expenses may include expenses for your vehicle or for travel, meals, entertainment or even client gifts. Unfortunately, you have to itemize (i.e., not take the Standard Deduction) and your combined itemized expenses must equal 2.5% or more of your adjusted gross income. Since you have no way of knowing in January what kinds of expenses your employer might force you to rack up in July, start maintaining a folder for these records right away.

Tips–Do you work in the food industry or a personal service profession where you receive tips? The IRS expects you to keep track of and report what you’ve made. They’ve even created form 4070A with lines for each day of the month–print 12 of them–to help you maintain your record of the tips you took in and what you were required to “tip out” to other support staff members (like bus boys, shampooers, etc.).

Proof of payment for jury duty–Most people get less than $9/day (though some municipalities are now paying up to $40/day), but since it’s reported to the government, you need to keep your records, too, so you can report it as miscellaneous income. If your employers required you to turn your jury duty payments over them, you’ll want records so you can request an adjustment to reduce your AGI.

Self-employed/small business expenses–If you own your own business, Paper Doll hopes you have a carefully-created filing system for all your business-related expenses. But just in case, next week’s post will be all for you, reviewing the kinds of records you need to maintain to ease the small business tax-time burden.

Remember, Paper Doll is a professional organizer. In the parlance of the web, IANAA (I am not an accountant) and IANYA (I am not your accountant). For tax-related questions, please contact an authorized tax preparation specialist or financial planner.

If you drive a car, I’ll tax the street.
If you try to sit, I’ll tax your seat.
If you get too cold, I’ll tax the heat.
If you take a walk, I’ll tax your feet.

~ “Taxman”, The Beatles

Sitting on a cornflake, waiting for the van to come.
Corporation T-shirt, stupid bloody Tuesday.
Man, you been a naughty boy, you let your face grow long.
I am the eggman, they are the eggmen.
I am the walrus, goo goo g’joob.

~ “I Am The Walrus”, The Beatles

If you’ve ever sat down to do your own taxes without any advanced preparation, you’ve probably been babbling the nonsensical “goo goo g’joob” into the wee hours of the morning. (Perhaps crumpled tax forms sound like Corn Flakes when you sit on them? Oh, those Beatles!)

Organizing your paperwork for tax season can be easy, if you’ve been filing away your paperwork all year as it’s come into your life, and if you have a handle on what papers should already have arrived. If not, you might find yourself procrastinating on what could be profitable (if you’re expecting a tax refund) or at least insightful (because the sooner you know how much you owe, the more time you’ll have to amass it before April 15th).

Different types have different approaches to the coming tax season. For example, if you’ve practically memorized IRS Publication 552 and know the differences between Forms 5498 and 5754, you’re the Taxman. Maybe you already work for the IRS, or are a certified public accountant, or feel about schedules and forms and worksheets (Oh, my!) the way others feel about Facebook or I feel about a certain Mr. Clooney.

If you sell services or products, like ovoid chicken byproducts, for example, you are the Eggman. You’re a self-employed small business owner, and we will cover your tax paperwork issues in a post two weeks from now.

If you look decidedly like Wilford Brimley:

but are not actually human, then you are the Walrus, and it’s highly likely that you don’t owe any taxes this year. (Note: if you are a walrus, but work in the performing arts sector and have received a W-2 or 1099, please see your accountant for further instructions.)

In this post, we will cover the information returns, forms you should have received (or will soon be receiving) that inform you (and the IRS) what monies you have received, and in some cases, paid. These documents are essential to filling out your taxes, which is why I frequently advise having a Tax Prep hanging folder (with interior folders for informational documents like these, as well as charitable and medical receipts, which will be covered in next week’s post).

Have you noticed if you’ve received all your forms? All W-2s and most 1099s are normally required to be mailed by the last day of January, but because January ended on a Sunday this year, companies and individuals had an extra day. Although employers had to deliver or mail W-2s to employees by February 1st, they have until March 1st to postmark copies to the IRS.

Note also that financial institutions have until February 16, 2010 to mail 1099-B forms (Proceeds from Broker and Barter Exchange Transactions), relating to the sales of stocks, bonds, and mutual funds. 1099-S forms, related to real estate transactions, also have the 2/16/10 mail deadline, so watch your mailbox for these items.

Each taxpayer’s situation is unique, but the following are the most common types of information return forms used by individuals (i.e., not those involving trusts, estates or corporations).

W-2

This is the Wage and Tax Statement form your employer gives you (and sends to the IRS) to delineate how much you were paid, and, if applicable, how much money was withheld from you and paid to the federal and/or state governments for taxes and FICA (Social Security and Medicare). Your W-2 may also indicate other values withheld from your check, including regular donations to the United Way, payroll purchases of stock options or savings bonds, etc.

Don’t confuse the W-4 (that tells your employer how much tax to withhold) with the W-2. Yes, the IRS number system is weird–you get a “4” when you start a job or change your deductions, but a “2” at the end of each year’s performance of that job…not at all in numerical order.

There are multiple copies of any one W-2. Employers submit copy A directly to the Social Security Administration and keep copy D for their records. You get to keep copies B (to send with your federal tax return) and C (to keep for your records), as well as copies 1 and 2 to file with any applicable state or local tax authorities. Paper Doll maintains that it’s awfully disorganized to change nomenclature in the middle of a sequence from letters to numbers.

If you haven’t received your W-2s by February 15, 2010, contact your payroll or human resources department immediately. W-2s may be given directly to employees at work, or might be mailed to the address of residence you listed on your W-4. Also consider:

• Did you change employers this year? If you had more than one job in 2009, be sure that you have received W-2s from each employer. If you received a promotion or moved laterally, you’ll still only receive one W-2 from each employer, not one per position.
• Did you change addresses? There’s only so much a former employer will do to track you down to give you your W-2. Remember, just because you don’t have your W-2 does not mean the IRS doesn’t know what you earned–remember Copy A!

If former employers drag their feet about sending a W-2, or if a past employer has gone out of business, and your W-2 hasn’t shown up by March, contact the IRS at 800-829-1040. They’ll run interference and also send you a form 4852, which you can fill out in lieu of one supplied by your pokey old company.

1099

There’s not just one type of 1099. In fact, there make a whole bunch of 1099s, to reflect the myriad types of financial transactions of which you might have been a part. For example:

1099-MISC is what you may receive from a client/customer if you were an independent contractor (i.e., self-employed) or received any kind of revenue for doing work when you were not actually considered an employee. Individuals and companies are only required to submit 1099-MISC forms to you and the IRS if you earned $600 or more from them during a calendar year. Please note that even if someone paid you for doing work as an independent contractor, they may not know they should be sending you a 1099-MISC. This is why, if you are self-employed or irregularly-employed, it’s still vital to keep track of your incoming revenue for yourself. (We’ll discuss this more two posts from now. I bet you can’t wait!)

1099-INT reflects the interest income you receive from interest-bearing savings and checking accounts, money market bank accounts, Certificates of Deposit, and other accounts that pay interest. This form also notes whether foreign or U.S. taxes were already withheld and if there were any penalties assigned for early withdrawal from an interest-bearing account.

1099-DIV indicates the dividends or capital gains you received as an investor. You would receive this from a broker, mutual fund company or other type of investment company. You may not have actually received dividend payments; check your account history, as you might be registered in a DRIP, or direct re-investment plan where dividends are invested back into the stock.

Unlike W-2s, which normally come in separate envelopes with nothing but a cover letter to obscure them from view, 1099s aren’t always so easy to find. Very often, instead of sending a 1099 in a separate envelope, a bank or brokerage may attach a tiny 1099 to the bottom of a fourth quarter statement, divided only from the actual statement by a faint perforation. Keep your eyes open!

Some internet-only banks, like ING, only provide 1099-INTs digitally. By now, you should have received an email from your online bank, telling you how and where to locate your online 1099. To avoid any kind of phishing scams, log into your online bank account directly (instead of clicking on any email links) to access 1099s as downloadable, printable PDFs.

If you haven’t received your 1099’s by the end of February (or your 1099-B or 1099-S by March 15th), contact the financial institution directly. If they do not respond to your inquiries in a timely manner, you have a few alternatives.

For most 1099s, if you can gather the information via another method (i.e., year-end statements for bank and brokerage accounts, copies of checks deposited as an independent contractor, etc.) and are reasonably sure that your own paperwork is accurate, substitute that to fill out your tax forms.

However, 1099-R forms must be attached to your tax return because they indicate when income tax has been withheld. If you can’t get anyone to help you acquire your 1099-R, call the IRS at 800-829-1040, as described above for W-2s, and they will send you a substitute form 4852 to use in lieu of an official 1099-R.

1098

1098s are not merely 1099s with low-self-esteem, nor have they sworn off carbs. This form, the Mortgage Interest Statement, reflects the interest you paid on your household mortgage, which is generally deductible on your federal taxes. If you paid more than $600 in mortgage interest last year, your mortgage holder should send you (and the IRS) a 1098.

Your 1098 doesn’t just reflect mortgage interest paid; it also delineates whether you paid PMI, or private mortgage insurance, which can be up to 100% deductible if your adjusted gross income is less than $100,000. (Check with your CPA; I’m just here to give organizing advice.)

There are also sub-types of 1098s. For example, you might receive a 1098-C from a charitable organization if you donated a car, boat or airplane. A college might provide you with a 1098-T to indicate you paid tuition, or a lender might send a 1098-E to show you’ve paid student loan interest.

If you have not yet received a 1098, don’t panic. You’re not required to send 1098s to the IRS with your return. However, it is important that you have accurate information to submit on your return. So, are you missing a:

–1098 for mortgage interest? Contact your mortgage holder by phone to request documentation of the mortgage interest you’ve paid; if possible, request that they fax the figures to you so you have something in writing right away. Email, however, is not a safe medium for transmitting documentation, especially as your file likely includes your Social Security number.

–1098-E for educational interest? Contact the lender or your school’s student aid office. Note that not all educational interest is deductible. (And if you have a campus ID card that can be used as a charge card, the interest you pay on a balance carried for late-night snack food is definitely not deductible.)

–1098-T for tuition paid? Contact your school’s administrative business office. If you (or your child) live on campus, an in-person visit will likely achieve quicker satisfaction than a phone call or fax, as ID can be verified more quickly and it’s harder for staffers to ignore someone hovering around their desk (vs. an email, fax or voicemail).

These are just a few of the informational forms that individuals are most likely to receive in support of completing tax returns. If your personal financial dealings are complex, you might find it useful to peruse this lengthy list and description of all tax-related forms…or hire a professional.

Next week, we’ll look in-depth at all the supporting materials (other than information return forms) that taxpayers should be collecting and organizing to help ease the strain of tax time…so you don’t find yourself sitting on a Corn Flake in the wee hours of April 15th.

By the beginning of February, most consumers have the doldrums. New Year’s resolutions to organize finances have faded in the shadow of piles of credit card statement reflecting holiday excesses. This February, however, brings some good news, as most of the elements of the Credit Card Accountability, Responsibility and Disclosure Act of 2009, designed to bring a little bit of fairness to credit card practices, rolls into place as of 2/22/2010.

A few of the provisions actually went into effect last August, just three months after Congress passed the law. As of last summer, lenders are now required to mail credit card statements 21 days before the payment is due. You might have noticed a lead-time creep over the past few years, when companies were only required to mail statements 14 days prior to due dates. With weekends and national holidays in the mix, it gave very little turnaround time for struggling (or disorganized) consumers.

Another provision that went into effect last August was requiring 45 days advanced notice of changes to interest rates and fees. Credit card companies used to only have to give only 15 days of advanced notice before raising interest rates.

What do the new changes mean for you? 

Let’s Talk About Rates, Baby!

Perhaps one of the biggest boons for consumers is the new provision that credit card issuers can’t increase rates on existing balances unless:

–payments are more than 60 days late
–the teaser rate has expired
–your card has a variable rate tied to a financial index that has increased

Until now, when your credit card rate changed, it would mean increasing the interest rates on your pre-existing balance–a retroactive rate hike! It would be like the clerk from the grocery store showing up at your house, demanding more money for the pint of Ben & Jerry’s you bought the prior night.

Sure, we all know that the best thing is to never carry a credit card balance, but this is the real world and Paper Doll realizes that some of you do carry balances, that there are no unicorns and that George Clooney hasn’t called to make sure I’ve saved Valentine’s Day for him. (Sigh…)

If you’re carrying a credit card balance at a non-teaser fixed rate and you’re keeping your payments current, your issuer can’t raise the rate on that balance. And, except for expiring teaser rates, credit card issuers can’t increase the interest rate on new purchases in the first year you hold a card.

Note, however, that the interest rates on all future purchases can increase (as long as the issuer abides by the other rules, as noted throughout this post).

Don’t Be A Tease

In the past, credit card company teaser rates (those low, low rates they dangle to get you to sign up?) sometimes lasted as few as five or six weeks! Under the CARD Act, teaser rates must stay in effect for at least six months. No more sneaky teases!

It’s a Whole New Universe!

Had you ever heard of universal default? That was the policy that credit card companies could (and would) raise your rates if they learned that you had been late or otherwise defaulted on terms of other accounts unrelated to their own company. Rates of 6.9% had previously shot up to 29.9% on Card A because a person had been reported late (even if reported in error) on Card B operated by another company. Now, the CARD Act has eliminated universal default, bringing things back down to Earth.

Stop Spinning Your Wheels–No More Double-Cycle Billing

Another sneaky method some credit card companies have used is two-cycle billing, where issuers were averaging daily balances from the previous billing cycle because carrying a balance eliminates a cardholder’s right to a grace period. Yes, if you had a card with two-cycle billing (I’m looking at you, DiscoverCard!), you were paying interest on debt you’d already paid! The CARD Act does away with two-cycle billing.

In The Interest of Full Disclosure

Savvy Paper Doll readers certainly already know that if one only pays the “minimum” payment required by a credit card company, it can take years of extra payments (and extra interest) to pay off credit card debt. However, many consumers don’t realize this, and they certainly don’t realize the extent to which their payments for that fancy dinner or fuzzy sweater will be drawn out over time. The CARD Act requires that monthly credit card statements indicate how long it will take to pay off a balance (and the total cost, including all that pesky interest) if you make only minimum payments.

Although this wasn’t required to go into effect until February 22nd, Citi and other card issuers have already started sending the new statements. One consumer with a balance of slightly less than $2700 was shocked to see, in black and white, that paying only the minimum would take 16 years and almost another $2700 in interest! Paper Doll believes the CARD Act disclosures will have a profound impact on the speed with which consumers who are able to pay more towards balances will do so.

Over The Top

In the past, credit card companies could automatically charge you a fee if you went over your credit limit. You’d probably figure that if you have a $5000 credit limit on a card, if your current purchase would put you over the limit, the store clerk would lean over quietly and say “Pardon me, but there seems to be a problem. Perhaps we should use another card.” But nooooooo. Credit card companies apparently believed that the huge humiliation (note my dripping sarcasm?) of such an experience was preferable to huge fees tacked on to an already over-limit card, fees which would then have interest charged on them.

Once the CARD Act goes into effect, over limit fees can only be applied to your purchases if you opt in and give prior approval to the credit card company.

Ready, Fire, Aim: Apply Payments Where They Should Go

As a professional organizer, I’ve had to show clients how they were getting raked over the coals by credit card companies in unexpected ways. Most never knew that if they had a promotional rate (0%, 1.9%, etc.) for a balance transfer to a card that already had a balance, or continued to use that card after doing a balance transfer, that the credit card company wasn’t applying the payments as they assumed. Credit card companies generally applied payments to the lowest interest rate balances, allowing higher interest rate balances to pile up.

Let’s say you transferred a balance of $10,000 to your card, using a 0% promotion. Plus the 3% or 4% processing fee. That fee, plus the transferred amount, would be at 0% until the rate expired. Let’s say you then charged $300 on that same card. Even if you turned around and paid back $300, the $300 would be applied towards your balance with a 0% rate, while your $300 purchase rate balance would sit there, racking up interest, until the original $10,000 was paid off. And it was all explained in the tiny legalese that few consumers ever read.

Now, under the CARD Act, payments in excess of that sneaky old “minimum payment” must be applied against the balance with the highest interest rate first, and then to any other balances, in descending order according to interest rate, yielding impressive long-term consumer savings.

Gimme A Call

If travel or disorganization might keep you from mailing a payment in time to reach the card issuer by deadline, you have electronic alternatives. Online bill-payment from your bank (or right at your credit card company’s site) can give you last minute breathing room. But what if you’re traveling and have no access to Wi-Fi? What if you get hit by a wacky winter storm and have no electricity, let alone internet access? There’s always the phone! However, lots of credit card companies have charged a convenience fee for paying a bill by phone.

Under the CARD Act, if a credit card company does offer a pay-by-phone option, it has to be free unless you need to use a live service representative (instead of a robo-phone) to make a rush payment.

Do You Believe The Children Are Our Future?

Two other provisions will have a direct impact on the future financial health of young adults. In the past, anyone over 18 could apply for (and likely receive) a credit card without substantive proof of financial solvency. With the CARD Act:

–Applicants under 21 years of age will have to have an adult co-sign for their credit cards or otherwise provide actual proof of regular income. 

–Credit card issuers will no longer be allowed to offer sign-up gifts (t-shirts, mugs, flash drives, etc.) on or near (within 1000 feet of) college campuses, or at events sponsored by colleges.

By making it less likely that college students can amass credit cards (and therefore credit card debt) as easily as they can scarf up free pizza, the next generation should be able to graduate without debilitating mounds of (non-educational) financial obligations.

A Chance for a Do-Over

One provision won’t go into effect until August 2010. With it, if consumers are assessed a penalty interest rate because of a late payment, they can reclaim that prior (lower) rate if they pay on time for six consecutive months.

Of course, these new rules mean that lenders are going to be looking for other ways to sock it to you (like charging annual fees for participation in rewards programs), so you still have to be aware and diligent when handling your finances. Be sure to:

Review your statements each month before paying & filing them away. If you use paperless billing, you’re helping the environment but you may not notice small changes if you can’t take a pen or highlighter to mark the changes. (Please, no little highlighter circles on your monitor!  It will make reading future Paper Doll posts very difficult.)

Know the terms of your credit card agreement so you can quickly notice changes or errors and take advantage of opportunities:

• What is your interest rate right now?
• If you have multiple rates (due to promotions) on the same card, do you know which balances are associated with which rates?
• Are your interest rates fixed or variable?
• How long is each promotional rate is in effect? (Is it until the last calendar day of a particular month, or until the last billing date in a statement period?)
• What’s your credit limit on each card? How much of it are you using?
• Are you paying an annual fee? If so, why? Annual fees are generally for perks, so be sure that the perks are something of which you’re actually taking advantage.
• Are you earning points or miles? Have you ever used them? Check to see if you’ve earned enough to get cash back or a statement credit, which provides a better return on investment than dribbles of hard-to-redeem airline miles.

Rein in any bad habits that might negatively impact your FICO score, as we discussed previously.

Know which credit card issuers offer the best alternatives for your particular situation and spending habits. (That way, if your rates do increase, you’ll have time to evaluate the best replacement card.) Do you need a low-interest card? One that offers a particular type of rewards? Peruse sites like BillShrink.com and BankRate.com to analyze your options and search by card issuer, credit score level or card type.

An organized, educated consumer is a powerful force. Paper Doll readers, flex your muscles!