Tax forms are plunking into mailboxes across the country right now. For many, tax time is one of the most dreaded times of the year. It could be because they end up owing, but my guess is it’s more because they are unorganized. I know I used to dread the run up to tax time and collecting together all my paperwork. I’d usually lose half of it—and only the good half, too. All those receipts I could have written off over the years, money down the drain…
But I am getting better. Last year when both Andrew and I moved to full-time self-employment I realized I had to be organized. While there are plenty of computer-based programs to keep things straight throughout the year, they are only as strong as their weakest link. That weak link happens to be me. I forget to update them daily. Heck, I’m lucky if I do it monthly. So last January I worked out a system that works for me. This system may not work for you. A spreadsheet, Quicken or another program may be what works for you. But any system is preferable than none. Dedicating two hours to getting your tax paperwork organized this week will save you time and money all year.
I’ll detail a few of the things I am doing to stay prepared for the tax man year around to get you started.
A pocket file. I use a coupon file that I received as a free gift from my credit union. It has 15 pockets and is about the size of a checkbook. You only need 12 pockets. I labeled one with each month and the other three work as a catch-all for stamps and such. It sits on my dresser where I empty my pockets each evening so I can file receipts in it immediately.
Receipts. Speaking of receipts, you need to save those. I’ve heard the argument that you can just look the items up on bank or credit card statements. Yeah you can, but you likely won’t. I never did and I’m a generally organized person. Save them now and you don’t have to worry about it later.
A pen. This is one of those items in the catch-all pocket of my file. I mark on the receipt as I’m filing it what I am saving it for. “B” stands for a business expense, “C” stands for charity, “H” stands for home (such as energy improvements), and so forth. Your codes may be different, of course. Just remember to use them.
Income Statements. For many of us these are our paycheck stubs, interest statements and so forth. Just slip them into the appropriate month’s pocket and you are good to go. If you are self employed, a different system is needed. I use a spreadsheet. I have a reminder set on Google calendar each month to help be remember to update it. I then print it out, paper clip check stubs or invoices to it, fold it in half and slip it in the appropriate pocket.
There are other things you may need to save each month, though generally these are the big ones. Once every three months or so I sort through the pockets and input the information into my bookkeeping program. Once tax forms start hitting my mailbox I can be ready to rock them in a half hour or less. No more stress, no more panic, and it only costs two hours of time.
How do you you keep your paperwork organized? Let me know in the comments!
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