Does the thought of preparing for tax time fill you with dread? Tax time can make anyone stressed out – but there’s hope! By using a few easy organizing techniques, you can sail through your taxes this month.
Plan in advance. Don’t wait until the tax deadline looms near if you know that your receipts need organizing and that you haven’t kept track of your expenses. Spend one or two hours a week (or just 15 minutes a day) sorting your documentation. This will save you lots of time and stress when you or a professional are actually preparing your taxes.
Who’s preparing your taxes? Think about who will be preparing your taxes, and what sort of information they’ll need. Preparing your own taxes is a lot easier if you make a checklist of what documents (W2s, bank statements, etc.) are needed. With a checklist, you’ll know if any important information is missing when you sit down to prepare your taxes. If you’re going to be giving your information to a tax preparer or CPA, ask them how they would like to receive your information. Some tax preparers want a list of expenses, while others are happy to take receipts and do the totaling for you.
Record your expenses. If you don’t have an organized way of keeping track of your deductible expenses, you may be missing out on big savings come tax time. Create a list of your expense categories using a simple list, a ledger, or a computer-based system. As your expenses accumulate, add to your category totals so you can see where your money is going.
Keep everything together. Scattered receipts and expenses can lead to lost deductions. Instead of losing your receipts or keeping them in a shoebox, purchase an inexpensive accordion folder. Label the folder with your expense categories, and as you get a receipt, drop it into the corresponding slot. Totaling your expenses for each category at tax time will be a breeze!
What about next year? Don’t wait until next year’s tax time rolls around to start thinking about your 2005 taxes. Create an accordion folder for next year, along with your category list. Keeping track of receipts and expenses throughout the year can eliminate tax-prep related stress.
Paying taxes is a fact of life, but the stress surrounding tax preparation doesn’t have to be! By using some of the simple strategies I’ve described, preparing this year’s taxes can be quick and painless.