Reduce tax time stress with planning and organization

March 5, 2011 by Janet · Leave a Comment
Filed under: Clear the clutter, Home Organization, Office Organization, Paper Management

I filed my tax return today! And all 2009 documents are filed safely away with my tax return. Because of my organized filing system, it took less than an hour to gather everything together. This is a huge improvement over past years when I didn’t have any system in place. Every year I procrastinated until the last minute because it was such a chore to find everything and organize it before I could even begin working on the return.

Are you guilty of procrastinating when it comes to doing your taxes? Is it because avoiding tackling the mountain of receipts and documents that have been piling up for the past 12 months? Follow these easy steps to make this season less taxing.

Tax time is inherently stressful for people because they realize that they need to organize their important documents but they don’t know where to begin. In reality, tax time is the perfect opportunity to get organized and to develop a system that will work for you for years to come. This is what made the difference for me.

With the tax deadline looming, try these suggestions to make this season less stressful.

1. Prepare for tax time by making an electronic checklist of documents you will need based on your returns from the last few years. Create the checklist by reviewing your tax returns from previous years and attach it to the inside flap of your tax folder. Also, organize your documents by category such as income, deductions, exemptions and miscellaneous. For instance, deductions would include mortgage interest, property taxes and residential energy credits. Exemptions could include vehicle registration and taxes, medical expenses, contributions to IRAs and student loan interest paid. By checking off the items as they are received, you will know which documents have arrived and which ones you are still waiting for.

2. Purge files of monthly bills from the previous year and set up a filing system for the current year that includes receipts, credit card and bank statements, medical expenses and utility payments. It is best to shred any documents before you discard them. Only keep prior year documents that are needed to support a prior year tax return.

3. Place current tax records and other important documents in files that are clearly marked and easily accessible. After your tax returns have been filed, place your copy of the return and all supporting documents into a secure file, preferably something with a closed top like a Smead Expanding File, label it for the tax year, and store in a secure location with previous years’ returns. If you prepared your tax return electronically, place a disk with backup copies in the file for safekeeping. The picture shows what I use and it has worked great for many years.

4. Plan ahead for next year by setting up a filing system for documents and receipts for the current year. In January, get a jump start on this year’s tax return by setting up an expanding file with sections labeled for income, expenses and taxes. Place documents like payroll stubs, 1099s and statements from your financial institution in the income section; receipts for tuition expenses, real estate transactions and donations in the expense section; and receipts for tax expenses in the tax section. If you store the file close to where you sort your mail and file the documents as they are received, the papers will be ready for you when you begin working on next year’s tax return. I love the FileSolutions Home Filing System, a ready-made colorful home filing system that makes filing easy.

5. Preserve tax returns indefinitely and store supporting tax documents (which can be destroyed after seven years) in a file labeled with the year and the destruction date. Be sure to check with your tax advisor before destroying any documents.

6. Put Your Feet Up and know that you are ready for next year!

With April 15th rapidly approaching, hare a few free sites that offer free filing services: