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I’m Already Thinking of 2006 Tax Returns, Are You? July 31, 2006

It may seem a bit early to think about your 2006 tax returns, but by the time you realize, the end of the year will come faster than you had thought. But there are some things you can do now to help make it easy on you (or your accountant) come tax day in April, 2007.

I can’t believe that 2006 is 60% done!:

For me, the end of July is a good time to think about my mid-year financial picture. It helps me assess what I’ve achieved and what I need to do in order to reach my financial goals. Here are some of the financial items I think about in July for the end of the year preparation.

  1. Review 2006 income/salary (and how am I going to bump that number up?)
  2. Compile tax deductions for 2006 by keeping a 2006 tax file
  3. Review 2006 expenses and find areas to cut
  4. Create and review 2006 income statement (aka profit and loss statement, or P&L)
  5. Create and review 2006 balance sheet

I try to think of my financial picture like a business. Think of the balance sheet as the ultimate scorecard for your “business” at a fixed point in time (mid-year). The income statement shows money in (income, revenues, sales) and money out (expenses, costs) over a period of time, while the balance sheet is based on this equation: Assets = Liabilities + Equity. These two are really needed to understand the current and future conditions of your business.

I have to admit I still have to create my income statement and balance sheet, but it shouldn’t be too difficult since I’ve compiled my year-to-date information in a folder.

Comments»

1. mapgirl - July 31, 2006

I’ve got a draft mode post about this very topic. The long and short of it is that I have a major medical expense coming up which will allow me to take a larger write off and receive a refund. But since I have planned this out, I can stop witholding for two paychecks at the end of the year and just get a smaller refund. (Very exciting!)

I love having my tax information handy for running some quick calculations at home.

2. Kyle - August 3, 2006

I guess great minds think alike ;)
That’s great! You have your taxes all planned out. I wish I can be as diligent as you are.

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[…] I?m Already Thinking of 2006 Tax Returns, Are You? It may seem a bit early to think about your 2006 tax returns, but by the time you realize, the end of the year will come faster than you had thought. But there are some things you can do now to help make it easy on you (or your accountant) come tax day in [.] (more) […]