Keep Good Records to Reduce Tax Time Stress
Now that tax time is upon us, you’re probably in the process of or thinking about getting started on your taxes. The mere mention of taxes strikes fear in our hearts because it’s overwhelming and it’s not clearly understood. One of the main reasons we delay filing is disorganization; we don’t know where the papers we need are located, and sometimes we don’t even know what they are. Add on the fact that we tend to have a lot of paper clutter and it’s no wonder we avoid this arduous task.
However, it doesn’t have to be difficult. Having organized records makes this process so much easier. Taking the time to organize your information this year will make next year a breeze. Here are some important tips to help you get started:
Designate a Storage Location. Set up a designated place for tax documents and receipts. It may be a hanging file, folder, bin, or envelope – whatever works for you. Just make sure it’s accessible and clearly marked. Use it to store all documents that may have an impact on your taxes. If you think you might need it for tax prep, keep it. It’s much easier to toss it later than to scramble to find or recreate it at the last minute.
Identify Relevant Information. As you’re gathering documents for your return this year, take note of what documents you need. These documents might include receipts, investment, bank and credit card statements, property and auto tax receipts, W2s, or 1099s. You might even make a checklist of these items to store in the tax folder for next year.
Gather Documentation. You may need to create subcategories for taxable income and deductible expenses you accumulate during the year such as rental income, business expenses, education expenses, charitable donations, or medical expenses, to name a few.
Be Proactive! Document well during the year. When you donate to charities, get in the habit of getting a receipt each time and list the items and their donated value right away. Record business mileage after each trip. This will save you so much time.
File Immediately. Throughout the year, add receipts and supporting documents to the appropriate tax folders as you receive them.
You’re set! When tax time comes around, grab your tax files to prepare your return or take to your tax accountant. Organized documents will save you time and money!
Archive Tax Documents. Filed tax returns should be retained forever. Consult your accountant to determine how many years you need to retain your supporting tax documents.
Good luck this tax season! If you need help with your paper or electronic organization, give me a call!