Do you start to panic this time of year as you think about preparing your tax return (you have thought about it by now, right?). If that panic is due to something other than disorganization, I’m not sure I can help you. But if you spend hours pulling apart your file cabinet, clearing out your car, emptying your wallet, and dismantling your paper piles looking for tax-related receipts, I’m here to tell you there’s an easier way. Use the pain of being disorganized for this year’s taxes as motivation to prepare now for next year. With some advanced preparation, you won’t have to spend hours finding, organizing, and adding up receipts. Not only will you save time, you and your accountant will able to avoid the “excitement” you’ve experienced in past pulling things together at the last minute.
Keep tax-related information together. Rather than spending hours digging through files or piles to gather, sort, and organize your tax records, consider keeping all the tax-related information in the same section of your file cabinet. Use a divided accordion file, file folders, or even envelopes to store all of your tax-related information in the same area.
Categorize your tax storage device. Review your most recent tax return and determine what types of information you needed to prepare it, or what information your accountant asked you to provide. Based on this review, label the sections of the accordion file, the file folders, or the envelopes with the corresponding categories. For example, you may need a section called “Charitable Contributions” for cancelled checks, receipts, and letters from recipient organizations. Other possible categories include “Dividends and/or Interest”, “Real Estate Taxes,” “Medical Expenses,” “Child Care Expenses,” etc.
Organize your receipts as you spend. Rather than tossing them into one big pile, place receipts into the categorized sections you’ve established. This will save you a lot of sorting time at the end of the year. You may even want to total the expenditures by category each month so that by year-end, you can quickly come up with the amounts for the entire year by category.
Here’s a link to my newsletter where you can read more about how to organize your tax information.
Wishing you simplicity, harmony and freedom,