You’re scrambling around your home office, looking for the paperwork you so desperately need to file your taxes. W-2s, 1099s, expense reports – it’s all blurring together and you’re asking yourself, “Where is that last piece of paper I need?”
Getting organized for tax time shouldn’t be something you cram into the evenings leading up to April 15. Instead, it should be a yearlong process. Tax time can be overwhelming enough without having to dig through piles of paperwork and the mess on your desk to find just what you’re looking for.
That’s why we’ve put together a list of things to get you ready. You’ll find essential steps for getting organized, tips to help you get ready for next year, and more.
Read on, my friends…
6 Reasons Being Organized For Tax Season Can Eliminate Stress
Come January, your mailbox becomes filled with all the documents you’ll need for filing your taxes – not to mention all the piles of receipts you have filed away. Here’s why being organized sooner (rather than later) will save you time – and stress.
- If you don’t have organized files, you’ll run the risk of misplacing documents and receipts that are essential for your taxes.
- You won’t get stressed by running to your tax preparer or post office in the days leading up to April 15.
- If you’re not organized and leave that up to your accountant, they may charge extra fees for the time it took them to get your paperwork in line.
- Thinking long-term, you should keep your tax records for four to seven years. Having these well organized throughout the year will help if an audit ever occurs.
- It’s also recommended you keep your W-2 forms until retirement. Having these filed nicely will also help down the road.
- It will make next year’s return easier. Having your old returns on hand will give you a great starting point when considering your credits, deductions, etc.
16 Essential Steps for Getting Organized
By early February, you should’ve gotten all of the paperwork you’ll need to file your taxes. Now, it’s time to get organized:
- Make a tax appointment – Call your tax preparer to schedule an appointment. Late February or early March is best, as they get busier as April 15 approaches. (too late for that this year!)
- Purchase an expandable file folder or box to keep your paperwork – Ideally, a device with partitions (so you can separate by category) is ideal. In the future, buy one of these at the beginning of the year. Whenever tax documents are sent to you, put them in the folder right away so they’ll all be in one place.
- Categorize – Categorize your folder into sections like: W2’s and pay stubs, 1099s, medical expenses, mortgage interest statements, real estate taxes paid, tax-deductible contributions, and business expenses.
- Eliminate clutter – The first step to finding the documents you need is to eliminate what you don’t need. Go through your files and get rid of expired warranties, year-old bank statements, and anything else that’s no longer needed.
- Gather all tax-related documents – This includes things like:
- Checking and savings account interest statements
- Real estate tax statements
- Mortgage interest statements
- Investment statements
- Receipts for charitable donations
- Pay stubs
- Retirement plan statements
- Record of any tips (this is most common for bar and wait staff)
- Gather all expenses – Hopefully, you’ve kept good track of these throughout the year. Gather all receipts that are considered business expenses, including:
- Advertising and promotion
- Professional dues and subscriptions
- Licenses and permits
- Utility, Internet, and cable bills
- Meals and entertainment
- Professional fees (tax preparation, business coaching, etc.)
- Interest statements
- Auto-related expenses
- Computer equipment
- Business-related books and magazine subscriptions
- Travel expenses
8 Commonly Forgotten (Yet Extremely Useful) Items
There are also several pieces of documentation that you may not even think of, but they’ll actually be helpful when determining your deductions. Look around your home office and gather the following:
- Rental property documents – Find any records that detail the purchase, improvements, or maintenance of rental property.
- Insurance policies – These can help determine how much you should be reimbursed for a casualty or theft, business losses, or medical expenses.
- Family records – Have records like marriage certificates and birth certificates handy in case your filing status or dependency information has changed.
- Capital asset records – This includes things like jewelry, stocks, bonds, antique collections, and more.
- Medical bills – This will give paper proof of any deductible medical expenses.
- Energy-efficient purchases – Anything installed on your property that is considered energy-efficient may be eligible for a credit.
- Theft or loss documents – If the unfortunate event of theft or loss occurred, collect information regarding when the item was missing, your proof of ownership, and the value of the property before and after loss.
- Gambling winnings – These are fully taxable, along with the market value of prizes, and should be reported using Form 1040. Be sure to include the type of gambling activity, the date, address of the establishment, and the names of anyone who was with you.
Using even a few of the above steps to get organized before filing your taxes will relieve much unneeded stress, saving you time and energy.
What tips can you give us for getting ready for filing?
Pamela King promotes tax literacy and tax payer empowerment through research and education. She preaches the “KISS-AF” gospel – Keep it Super Simple and Free. If you can use the 1040ez form and e-file then you should do it!