Arizona accountant
5719 E. St. John Rd.
Scottsdale, AZ 85254
(602) 867-4199
Fax: (602) 788-6911

January, 2008 Tax Tip

A New Year’s Resolution to Make and Not Break

If budgeting and/or organization have been long-standing issues that have created chaos in your life, you have lots of company.  The vast majority of my clients have expressed some degree of distress due to the lack of one or both of these potential “friends” in their daily lives. While they recognize the need for personal and business budgets as critical planning tools, they seem to never reach the point of pursuing and implementing them. 

As we enter 2008, why not resolve to eliminate them by following some rather simple, yet very useful tools?


A budget is extremely effective in making sure you have adequate cash flow — and, thus, ensure financial success. That’s why every person and business (from the smallest to the largest) should have a budget.  A personal budget is a plan for allocating future personal income towards expenses, savings, and debt repayment.  Past spending and personal debt should be considered when creating a personal budget.  The purpose of a business budget is to forecast revenues and expenditures to project how your business might perform from a financial standpoint if certain stretegies, events, and plans were carried out.

At this time, individuals and business owners are advised to get together with their accountants or other financial advisors and budget (project) income and expenses for the coming year.  Amounts can be broken down to cover monthly or even weekly periods, depending on one's needs.

Once the budget has been established, monthly actual net income amounts can be compared to monthly budgeted amounts. If actual income falls short of budgeted income, either expenses must be revisited or other ways to generate income must be considered.  The most important thing to keep in mind when doing either a business or personal budget is to be realistic!  Avoid setting goals that are not obtainable.   Being discouraged by setting oneself up to fail is the surest way for one to revert to his or her old habits.  Take small, achievable steps.



While organization can apply to many areas of one’s life, I will address the term as it relates to taxes.  In early January, I send my mailing list of clients and friends a very important letter advising them of how to best prepare for the meeting with their tax preparer.  In that letter, I offer to send them a tax organizer to help them assemble and organize their data.  If I prepared the prior year returns, the organizer will have the various income and expense categories and the amounts from the prior year.  As an alternative, the Links tab on my website has a very good organizer that can be downloaded. 


To avoid the agony of going back through your check register and credit card statements at or after year end, I suggest that you take a number of large envelopes and mark each one with a business or personal expense category that may have tax implications.  As you receive and pay bills or invoices mark the amount, date paid, and check number on each one and place it into the appropriate envelope.  Examples of business categories are car, telephone, insurance, and office supplies and expense.  Examples of personal expenses with likely tax implications are charities, property taxes, and medical.   


I find that doing this at least monthly will save you countless frustrating hours at year end and at tax return preparation time.  At the end of the year run a tape of the items in each envelope and staple the tape to the outside of the envelope.  This is not only very helpful to the preparer, but it will also save you money on your tax preparation fee.  There are several reasonably priced software programs that can assist you with these tasks.


If you need assistance in budgeting and/or organizing records, I'd be most happy to assist you


Here's wishing you a Joyous, Prosperous, and Healthy 2008!!



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