It's that time again!
The barrage of catalogs in your mailbox is turning into a flurry of year-end tax statements. If you dread tax time and usually spend your spring stressing over getting taxes done on time, these tips are for you! The best time to prepare for tax time is the year before, but if you didn't do it last year, start now! With these simple tips, you'll get your taxes done EARLY and be ready to enjoy spring! And once you have your system in place, it will be even easier next year!
Set an Early Deadline To Submit Paperwork! - The first step to becoming the master of your own financial well-being and reducing tax stress is to FORGET ABOUT April 15! Make YOUR Tax deadline the end of February or Mid-March and start getting your paperwork organized NOW.
If you use a tax preparer, call right now and schedule an appointment for as soon as possible. If you do your own taxes and have difficulty setting a deadline, consider getting a friend, family member, or coach to hold you accountable to meet your deadlines. Once you have a deadline, it's time to organize your paperwork.
STEP 1 - Gather Financial Papers
If the paperwork you need to complete your tax return is scattered, gather all the papers you need into a single box, basket or other container. If they are already in folders or other containers, gather the file folders into a single file container and move on to step 2.
STEP 2 - Sort
Sort your papers into broad categories such as INCOME, EXPENSES, and STATEMENTS. You can subdivide STATEMENTS into BANKING, CREDIT CARDS, INVESTMENTS, RETIREMENT, but if your papers are all in a jumble, using 3 major categories at first makes the job faster and simpler and requires far fewer containers. You can always micro-sort and break down the categories later if needed. But, honestly, most people never go back to the past years records so why bother? My rule of thumb is to not over-organize things you don't use regularly. Keep it SIMPLE. Unless you deduct expenses on your tax return, you don't really need to keep your credit card statements anyway.
STEP 3 - Eliminate
Eliminate any unneeded papers as you go. Keep only receipts that prove your taxable income and deductible expenses.
Eliminate receipts that are NOT tax-deductible if they are ALSO for items that are:
- NOT insurable
- NOT under warranty
- NOT income to you
For example, you don't need to keep electric bills unless you claim a home office deduction.
To determine exactly what papers you personally need to keep and what you can let go of, ask your tax advisor.
SHREDDING: Be sure to shred any documents that contain information that could be used to steal your identity such as: social security numbers, credit card numbers, bank account numbers, etc. You do not have to shred paper solely because it has your address on it. Your address can be found anywhere and everywhere anyway!
PART 2 is coming on Wednesday!
NOTE: The tips in this article work for most people, but if you have a unique tax situation or are overwhelmed trying to decide what will work best for your organizing needs, consult a financial organizing professional to help you set up a simple, efficient, easy-to-maintain system and ensure a stress-free tax season!
© 2008 Ariane Benefit, M.S. Ed