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Organizing Your Tax Information…Without Losing Your Mind

Photo: Ladyheart/morguefile
Photo: Ladyheart/morguefile

Time To Banish That Shoebox For Good

By Elaine Nadalin

If the April 15th tax deadline makes you break out in a sweat, you’re not alone. While many tax preparers will send out a tax organizer form to fill out before your appointment, they aren’t of much use if you can’t locate your income, deduction and expense information. Here are some great ways to get organized ahead of time and reduce tax-day induced stress.

Keep Track: Fortunately, there are many useful software packages for tracking income and expenses such as Quicken or similar products. They vary from simple to complex, depending on your particular needs. Or you may want to keep your records by hand.  This boils down to personal preference and convenience. The key is to set up a system you will use on a regular basis with minimal headaches. Make it painless, make it accessible and easy to use, and you will use it.

Electronic or paper? While most people prefer to scan paper items into an electronic file and toss the originals, much of it comes down to personal preference. The IRS has been accepting scanned documents since 1997. Keeping electronic files might be more appealing if you’re short on storage space or if you don’t want the hassle of keeping track of small pieces of paper.

Create a system…and stick with it: Most taxpayers will do just fine with a simple filing system or portfolio with multiple slots for paperwork. Label each section with categories such as “Income” “Bank Statements” and so forth. They key is to update your filing system on a regular basis. Bank statements can be filed once you are done reconciling your account, for example.

No matter how you configure your filing system, make sure you use it consistently. Don’t fall back into the habit of stuffing paperwork into a box or random folder never to see the light of day until April 15th.

Customize: If you are a taxpayer who also itemizes deductions each year, be sure to account for those categories as well. For example, if you make frequent charitable contributions of either goods or funds, be sure to file those receipts in the proper file as soon as you receive them and document then. Same goes for medical and child care expenses if you are eligible to deduct those.

By having a separate sub-file for each category, filing your income taxes will be much easier as everything is right where you need it when you need it. That tax organizer form that was sent out last year that made you break out into a cold sweat? No problem this time.

Be meticulous: If you are self-employed, a homeowner with multiple rental properties or another individual with receipts and expenses in multiple categories, create a sub-file for each category. For example, set up a file for each rental property where you can stash mortgage statements, tax bills, repair receipts, and other expenses. You can break out the categories even further by assigning a sub-file for each rental property, e.g. “Rent-Green Ave. property” and “Repairs-Green Ave. property” and so on.

If you are self-employed, be sure to set up sub-files for your income and expenses. If you have multiple clients, set up files and sub-files for each one. For example, set up a main file for your client, and then sub-files for income and expenses related to that account. Regardless of whether these items are recorded electronically or by hand, it helps to keep the receipts organized and easily available.  When you tax preparer asks, “Do you have that receipt for March travel expenses related to the Garcia account?” nothing feels better than to reach into your files and say, “Yes, I do. It’s right here.”

Your tax preparer will love you. Guaranteed. If you file your own taxes, you will love yourself come April 15th.

Keep it safe: It’s always a good idea to keep receipts, paid invoices and other tax data in a safe place. While an employer can issue a duplicate W2 should yours ever be destroyed, other documents, such as receipts, are not as replaceable. Consider keeping your tax files in a fire-proof box or safe. At the very least, stash your tax documents in a safe place out of reach of children and pets, and where they can be out of harm’s way. Nothing adds to the stress of filing day quite like trying to decipher the dollar amount printed on a coffee-stained receipt for that closet full of clothes you donated earlier this year.

However you choose to organize your tax data, the key is to get organized and stay organized. Tax day is much less intimidating with time spent organizing your tax data throughout the year. In fact, you may just get so organized that you will want to file before April 15th. Really.

Do you have some tax document organizing tips that have worked for you? Leave us a note in the comment section below.

This Post Has 3 Comments

  1. Richard Yaffee

    Thank you for the reminder–I opt to do mine monthly because it is so fun!

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