It’s fast approaching tax day and if you haven’t already filed, you may be feeling a lot of pain around the whole process. Fortunately, the Internet is here to help. Especially with next year. New innovations online, both literally and as metaphors, can substantially reduce the headaches associated with paying taxes.
Determining what you can write off as a business expense can be particularly time-intensive if you haven’t kept good track throughout the year. My wife and I have developed some helpful practices after several years of filing together to mitigate the terrible tax-time pain. And when I say we, I mean she’s come up with these ideas and then either done them or told me to do them. Here’s what we’ve found to be most helpful.
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Your Finances & The Future
Your financial data will likely join your other online data like social networks, favorite sites and subscriptions and more, as one big pool of data to manage and run apps on top of.
Just when society started coming to terms with the need for financial education for young people, now there’s a clear need for all of us to learn how to manage our online data in order to protect our privacy and maximize the benefits we get from it. That distinction between financial and data management education will likely cease to be relevant in the near future.
All of our data, including online, financial, medical and more is becoming a platform for the creation of new software and services. Some people call it leveraging our data exhaust, though that might make it sound less valuable than it is.
Two great places to learn about this future are our coverage of The Locker Project, a new platform for personal data being built by Jeremie Miller (the man who invented XMPP, the world’s biggest Instant Messaging protocol), and PersonalDataEcosystem.org, lead by Kaliya Hamlin, a long-time leader in the Internet Identity world. Add in the data from your connected home and devices, your Quantified Self (tracking your behavior and health) and more and the future looks awash in quantified opportunity.
The work of organizations like these may seem super-nerdy and web-focused today, but it’s quite likely to affect our real-life finances in the future.
Track Your Expenses Online Automatically
Ever since we started using Mint to keep track of my family’s expenses and categorize our purchases throughout the year, tax season has become far, far more bearable. Paper receipts are so inefficient – the contrast is just amazing.
Just like we say about the future Internet of Things: that which is instrumented (turned into a data producer) and quantifiable, enables the creation of new innovations and practices on top of that data as a platform. That’s true for Connected Devices and the Smart Grid, but it’s also true for our travels around town and each economic transaction we enter into.
Stop Using Cash
This one is hard for me. It pains me to give taxi drivers a debit card to pay for fares. I know they want cash. But every transaction performed in cash is untraceable through automated methods. It’s like Flash content to search engines!
Train Your System Well
Like any automated system, finance tracking systems need a little time invested in them to get them trained. The time you put in at first, setting up rules to shoot typical patterns of buying into categories that can be analyzed later in bulk, pays off by saving multiple times as much time and energy that would be required to categorize expenses manually.
The value of structured data is something we write about often here at ReadWriteWeb, and creating a place-based ontology for your bank account enables you to begin work on taxes at a higher level of abstraction. That’s the same strategy that semantic web advocates say will turn raw, unstructured data into a platform for innovation.
Unfortunately the metaphor only goes so far and even with a system like Mint, there’s a lot of time required to make sure that everything is categorized correctly at the end of the year. Well trained systems are very helpful – but they don’t do all the work for you. (In our house, my wife does all that work for me. Which means that she is more wonderful than the entire world of the Semantic Web and Structured Data. I already knew that, though.)
Pay Attention When You’re Doing Strange Things
You may have learned by now that if you are taking a trip out of town, especially if you don’t travel a lot, then it’s good to call your bank ahead of time and make sure they expect to see charges in a faraway place. Otherwise they might freeze your card.
Similarly, performing some casual pattern recognition and noticing when you’re engaging in purchasing behavior unlikely to fit into the online filters you’ve set up is a good idea. The follow-through on this is to go back frequently and manually categorize things that fell outside your filters.
We write here all the time about the value of aggregate data analysis for the discovery of patterns and anomalies. That’s all well and good on a global scale – but a little bit of thinking in the same way about your own personal data stream is helpful as well if you want to stay caught up.
What geeky thinking have you found useful for tax season? Share what you’ve got in comments here and we’ll all benefit. Unlike the taxes you pay for the collective good, any knowledge you share will remain in your possession afterwords.
Photo by YM
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