When it comes to filing your taxes, a little organization can go a long way towards making tax season much less painful. I have a couple of friends who do things in different ways, but with the same results, both of which make tax season less stressful.
How many of you absolutely hate filing? I’m raising my hand too! So, both of these solutions also simplify the filing process. In fact, the filing system is the key!
Instead of filing everything by topic, such as Utility Bills, Mortgage, Insurance, Medical, Phone, Cell Phone, blah, blah, blah; file everything by month, except for tax receipts, which you will put in a file folder, all by its lonesome. You can do away with the bulky filing cabinet; use it for linens or towels or to organize something else, like your photos. You can also donate it to Goodwill and take it off your taxes. Just use a simple accordion file. You can buy these on the cheap if you don’t mind a completely utilitarian look, or you can splurge a little and buy a really stylish one that won’t look yucky with your office décor. If you are keeping your filing cabinet, you can hide the cheapo accordion file inside the cabinet. Label each file pocket with a month, and then label at least one pocket as ‘TAXES’. If you do semi-annual or quarterly taxes, then you may want to have 2 to 4 tax pockets labeled. Then, each month as you pay bills or receive correspondence, put it in the file for that month. If you know that it will have to do with your taxes, put it in the corresponding TAX folder. For example, if you have a home office and you take a deduction for your office space, the utility bills, any office supply receipts, your cell phone bill and your phone bill if you have a separate or extra line will go in the tax file. If you think this is too simplified, then use a larger accordion file or divide each monthly pocket into two sections so that you not only have the months in order, but you have a tax pocket for each month.
To expand on this theme: do the same thing, but as you file, enter the tax information into a spreadsheet on your computer and mark it on the receipt or bill at the same time. You can just put a green checkmark or a red X or whatever you decide to annotate that you have input it into the spreadsheet. This will keep you from making double entries and will also clue you in at tax time, making it easy to know that you have already gathered the information. Make sure you do the same for those quarterly dividend statements etc. that are also tax-related. This will actually save you quite a bit of time in the long run, if you are dedicated about doing it, but even just doing the filing in this manner will save you tons of time…and space.
Then, at the end of the year, you simply get all your tax information together and take it to your tax proffessional. Then, you simply use a rubber band to keep all of your tax receipts together and bundle up all the other receipts for the year, and put them in a box marked with that year. In fact, you can put 5 or 6 years in one box if you are neat about it.
Now, you don’t have to keep all of your receipts for years on end. The IRS has their own recommendations, which is 7 years, and this is only for tax returns and the associated receipts. So, you can regularly clean out and consolidate those boxes of receipts, just keeping the tax prep material. You can also get rid of pay stubs, quarterly statements and other paperwork that duplicates paper you receive at the end of the year. For example, once you receive your W-2s you can get rid of paystubs for the year. The same goes for 1099s and for mortgage interest statements. But, do not discard indiscriminately. Identity theft runs rampant, so either burn or shred documents that contain personal information.
For more information, contact Elite Bookkeeping & Tax Services at (800) 416-3820 or (775) 884-618-8123 West Nye Lane, Suite 103, Carson City, NV 89706. Visit our website at www.elitebookkeeping.biz