Make a Tax Planning Resolution
Everyone makes some resolutions for the New Year. Along with your resolutions, consider adding one more – ACCURATE RECORD KEEPING. Thorough and accurate tax planning can be accomplished with timely and accurate record keeping. This is always an excellent strategy to help lessen your tax burdens and assist your tax team before the April tax crunch.
Crucial for Tax Preparation
Almost everyone knows that accurate and timely record keeping is crucial in business. But, this diligence is necessary for your personal records as well. Scrambling at the end of the year or right before April is not the correct way to keep your records. Accurate records should be kept and maintained in REAL TIME – as each transaction takes place. This allows you to know EXACTLY what your business or personal financial status is at any given time. Accurate record keeping leads to accurate information – and accurate information allows you to make educated decisions.
Accurate record keeping allows you to monitor your progress throughout the year. Keep records of transactions AS THEY HAPPEN. By knowing your charitable donations, capital gains or losses and pertinent tax transactions, your financial team can make better decisions for your overall tax strategy. These decisions are best made THROUGHOUT the year when your tax team has the time to plan and strategize accordingly. Having a rushed plan from an influx of information in the fourth quarter may lead to missed tax opportunities which could cost you money.
Crucial for Wealth Protection
Accurate records are crucial to wealth protection as well. Insurance companies require proof for many claims and thorough record keeping can help you, not only offer that proof, but speed the claim along. Large, expensive item purchases should also be tracked and noted to your insurance company for accurate coverage. Keeping your acquired wealth protected is a main component of true wealth management.
Crucial for Financial Statements
You need accurate records in order to prepare accurate financial statements, such as income statements, or net worth statements. These statements are CRITICAL if you require a loan (either personal or business) or are trying to secure a property lease. Remember to also keep all records necessary to support any items declared on your tax forms should the IRS need clarification.
Also keep track of the many sources of income that you may incur. Income can come from multiple sources and may each have a different tax status. Keeping an accurate track of this income can help your tax team with proper tax preparation.
Storage is Key
But accurate record keeping is only as good as your record storage. Keep important records safe. Place physical records in fire proof boxes or safe deposit boxes. Also, consider keeping digital copies of your records in a safe location online. WealthEdge® has a secure digital vault for Financial Planning clients – giving them access to the records from anywhere.
This resolution, like ALL resolutions, will require dedication and persistence in order for it to stick. But, unlike MOST resolutions, it shouldn’t be forgotten or cast aside. So if you try to keep one resolution this year, let it be this one – your tax team will thank you!!