Tax time cannot be avoided without penalty. Like spring showers, it comes around each year whether we like it or not. What you can avoid is the last minute search for documents, receipts, and forms you need to file before the April deadline.
If you work with an accountant, you can use their year-end tax planning guide to help you itemize your individual and business taxes. It often includes tips on lowering your taxes and keeps you up to date on current tax laws. You can make your own list as well but accountants can offer ideas you may not think of on your own.
What accountants won’t tell you is how to best organize all the documents and receipts you need. However, professional organizers will. We are available to help you stay organized for tax time year round. Here are a few suggestions.
Create a useable filing system
Useable means a system that you can easily interact with. It is located in an accessible place and is organized in a way that makes sense for you.
Mark your calendar
At the beginning of the year identify tax dates and mark them on the same calendar that you use throughout the year. You can either make notes or highlight these dates with color codes or stickers.
Collect documents and receipts
An accordion file folder or file box can be your reservoir for tax-related documents collected during the year.
Keep track of your sources of income including tips, wages, unemployment compensation, alimony and other sources. Your income will be shown on forms W-2, 1099, K-1, bank statements, and brokerage statements.
File sales slips, invoices, receipts, cancelled checks, and donations to qualified charities. The IRS recommends keeping the following records to support deductions or credits you claim on your return:
- Credit card and other receipts
- Mileage logs
- Canceled, imaged or substitute checks or any other proof of payment
Real Estate / Home
Keep your closing statements, insurance records, cost receipts for improvements and rental property records when applicable.
You may want your tax filing system to include specific folders for your situation including Medical, Child Care, or Student Loans.
If you are a business owner keep your business tax documents filed separately from your personal taxes. The IRS recommends keeping the following records:
Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
Asset documents: To verify your assets keep purchase and sales invoices, real estate closing statements and canceled checks.
Decide how often to organize paperwork
Some people think that going through their paperwork once a week is too hard to do. Your professional organizer can get you started with a customized approach that works for you and makes tax time a breeze.