How to Organize Papers for Tax Season
It’s that time of year again… time to get your documents organized for tax season. With all the unexpected issues that the pandemic created over the past year, you may not be as prepared as in past years. Here’s how to organize papers for tax season so that you can get on track quickly.
GET READY
Make a list. Having a simple plan will make organizing your paperwork easier which will get this task done faster. The first step in any organizing project is preparation, and tax season is no exception. Request a checklist from your tax preparer if you don’t have one from the past couple of years. Make sure that there aren’t additional documents specific to your situation that should be added to the list. For example, you have made some improvements to your home as a result of all the time at home. Or if you now have a home office, you may be able to deduct some of the related expenses.
Know the guidelines. Check out the IRS website for updates to the tax laws that may apply and for the schedule of filing dates. Be sure to visit your state’s site as well. It’s always benefical to be familiar with this information. It will be helpful if you are doing your own taxes. If you work with a tax preparer, he/she can provide additional explanations as needed.
SETUP SYSTEMS
File documents. If you don’t already have a filing system, it’s time to setup one. If you have a paper one, you may want to consider converting to a digital one. As many financial documents can be downloaded, the process is that much easier. Organize the documents and create a simple filing system by year with a few sub folders in each main folder. This is especially helpful if you’re tax preparer has a system which allows you to upload your documents. If you prefer to stick with the paper, organize the files in a similar manner.
Collect receipts. Receipts are easily lost on your desk, in your briefcase, or handbag. However, you may or may not need to collect all of them. Check with your tax preparer for guidance as sometimes credit card bills will be sufficient. If you need the actual receipts, file them away as they are accumulated so you don’t misplace anything of importance. Setup a paper or digital folder system, plastic envelope, or accordion file to collect receipts. Be sure to add information to the receipt if the reason for the expense isn’t clear.
Have a game plan and systems in place will make organizing your paperwork for tax time much easier and less stressful. Do you have an effective system for managing your tax paperwork? Reach out and share.