How to Have Yourself a Stress-Free Tax Day (This and every year going forward. . . )

I have always said there are three things in life one should never do themselves, and always hire a professional:

 

1.     Moving

2.     Coloring your hair

3.     Taxes

 

Whether you do them yourself (wow, I’m impressed) or hire a pro (hands up), there’s no getting around the fact that you still have to organize all the paperwork. And this is the thing that takes the most time. I mean, no one is really handing a shoe box of random paper to their tax accountant, and even if you were, you would still have to decide which papers go in the shoebox, right?

 

As an organizer, I believe in setting up systems to make every aspect of your life as easy as possible. And taxes are one of those things that you know are coming every year at the same time (like Christmas, but not fun).

 

Therefore, we can plan for this every year. Well-organized records will make preparing your taxes much easier, whether you do them yourself or hire a pro.

 

So what are some of the best ways to be organized and not stressed out about taxes?

 

Set up a “Current Year Taxes” system that works every year

 

Dedicate a storage space for all the tax-related papers that come in throughout the year. Then when it’s time to send them to your accountant, they’re all in one place and separated by type.  I am specifically talking about papers related to the current tax year. We’ll talk about what to do with those returns later.

 

Here are a few ways you can store current tax  year related papers as they come in your house:

Portable file box

Accordion style folder

Section in your file cabinet

 

When determining which system will work for you, think about how much paper you have coming in throughout the year. If your taxes are pretty simple, a small accordion style folder might be all you need. But if you have a more complicated tax situation, you probably need a portable file box or a section in your file cabinet.

 

Also consider what system will be easiest for you to maintain. Where would you keep a portable file box or accordion folder? Is there a spot in your home office where you could keep it accessible, so papers don’t pile up elsewhere? The trick is to keep the system super easy to access so that you have no excuses for immediately filing papers into it.

 

Create sections for your personal categories

 

Think about what categories you have to sort things into when you’re organizing your taxes each year. Then label each section so it’s easy to see what’s what. Here are some examples of categories you might need, and remember, I am an organizer, not a tax accountant, so just take these as loose suggestions on your road to being organized:

 

  • Income (W2s, 1099s, etc.) – identify all sources of income and gather all docs here

  • Expenses / Business Expenses

  • Donation receipts (cash and non-cash items)

  • Financial statements

  • Investment accounts

  • Retirement accounts

  • Healthcare receipts

  • Deductions

  • Property records (mortgage and property tax info, etc.)

  • Misc. documents (any notices you received from the IRS)

 

These categories can be named anything you want. Tailor them to your needs and specific tax situation.

 

Gather all your paperwork and file away

 

File all your papers into the corresponding categories and ta-da -- instantly feel super organized. Who’s dreading the April 15th deadline now???

 

Dedicate a spot in your home for your new system

 

Put your tax system in a place where it’s easy to access. It might make sense to put a portable file box in your office if that’s where you process mail, or you could hide it in the entry hall –easy to access, hidden in plain sight.

 

The most important thing is to put it where you will use it. It will see more action at this time of the year, so maybe it lives in a corner of your office now but hides away in a closet for the rest of the year.

 

What to do with returns

Not sure what you need to keep and what you can throw out (or shred)? A good rule of thumb is to keep tax related documents for 7 years; however, certain documents can be shredded after 3 and some need to be saved up to 10 years. Please remember, I am just giving information on how to organize your paperwork; for the most reliable tax information, please visit www.irs.gov

 

Depending on the system you use, you can store returns with the current year tax documents, or in a different, less accessible place. You only need to access them once a year, and hopefully will never get audited and actually need to access them beyond once a year.

 

To Sum Up, How to be organized and ready for tax day:

1.     Set up a current year tax system that you can use every year

2.     Create sections that are tailored to your personal tax needs

3.     Gather all your loose paperwork and file it into the system

4.     Dedicate a home for your system

5.     Store returns responsibly

 

By creating a system that works all year, you won’t have to spend a Saturday in April (or late night) searching for all the key papers your accountant needs right away! You can leisurely file them in their spot as they come into your home. They will all be right where you need them when you need them, so your accountant will have everything they need in plenty of time so you can do other things (get a massage?) instead of fielding frantic phone calls about missing documents.

 

And, as Spanish writer Miguel de Cervantes said (probably not about taxes, but I think it applies here) . . .

Does getting your taxes ready each year stress you out? Save this post for reference and a pep talk! You can do it!

Allison Yoder