Recordkeeping

There is this couple. She works for a nonprofit and he is an independent contractor. He's a consultant specializing in marketing.

They file his income on Schedule C of their tax return. As you can imagine, he has many expenses associated with his income. As astute he is with the computer and the internet, he relies on his wife to track all his business expenses.

He keeps all receipts and paid bills. He carefully places them in a box set aside for the sole purpose of collecting such important small pieces of paper.

When tax time comes around, she struggles through the box, sorting and sorting. She creates a handmade spread of columns of expenses by month. She sorts her receipts by month and then works her magic with the spread columns.

She hates this task and yet it is key to their tax return. They make quarterly tax payments and I assumed she did this task by month to help them calculate the tax payment to make April 15, June 15, September 15 and January 15 each year but that is not the case. They generally take last year's tax liabilities and divide is by 4.

Some years they are ahead and get a refund (or rather a credit toward the next year's quarterly payment) and many years they owe. She doesn't understand that it's a good thing as that means it was a better year than the previous.

But, back to her box of receipts. I have encouraged her to sort once - by expense. For the tax return, they only need a yearly total for that category of expense. If they are office expenses, her goal should be one grand total spent that year for office expenses.

Some horses don't retrain easily. She just struggled through the entire year of 2006 4 weeks ago. Sorting by month, writing on her spread, totally column after column.

I know she will never use a computer for this task. Excel would work or better Quicken but not for her. Recapping by expense sorting April's receipts from May's receipts is a useless step unless there is a reason to look at each month or compare one to another but when the job is put off until the last weekend I say go for the grand total by expense.

I love them both and I know how terrible that weekend was. On top of that, they owed more $.

'til later