How To Stay Organized For Tax Season
Around the first week of April, office desks and kitchen tables nationwide are taken out of commission by piles of tax records. The clutter is more than a mealtime inconvenience — it could be costing you some big bucks come tax time.
According to the General Accounting Office, the average taxpayer overpays the IRS hundreds of dollars every year by overlooking deductions and missing chances to itemize — opportunities that get buried in the forest of W-2s, 1099s, and quarterly and year-end statements each family generates throughout the year.
Stop letting the dollars slip through your fingers and into Uncle Sam’s pockets. Here’s a streamlined, simple, easy-setup, quick-bake system to once and for all get it done and get organized for the IRS.
By being prepared, you’ll be ready to file your return at the earliest possible moment. And the earlier you file, the sooner you’ll get your refund. The key to a successful tax form is proper reporting. The IRS wants to know how much money you made so it can tax it. You need to know what you can put on your Form 1040 that will help you trim your tax bill.
The simple three-folder tax filing system
Kick the “pile it and file it later” approach: It doesn’t work. Trust us. The following three-folder system — a basic organizational method — is just as easy to manage year-round. Depending on the complexity of your taxes, you can add folders to best suit your needs.
Folder No. 1: Income
What goes here: Every penny you earn that is reported to the IRS (salary, dividends, earnings, distributions, even that paltry $3.42 in checking account interest) comes with a paper trail. To keep it all straight, write all income sources (and amounts earned) on a single sheet in your “Income” folder as they occur. (Yeah, it’s easier to do as the year progresses, so vow to start doing it for the rest of the year.)
Folder No. 2: Expenses and deductions The amount of deduction detritus can quickly dwarf the Manhattan phone book. Take lots of deductions? Create separate files for the major categories (e.g., charity, medical, business) where canceled checks, utility bills, statements, and receipts go. If that’s more than you need, establish a single catchall envelope for records related to the current tax year. Here you’ll keep mortgage statements, investment-related expenses, medical bills, child care costs, and non-reimbursable/employment-related gas, food, and lodging receipts.
Folder No. 3: Investments If only the year-end statement were a sufficient record of annual account activity! Alas, it’s not always. That’s why we get monthly/quarterly/annual statements, purchase receipts, sale confirmations, year-end overviews, dividend notices. Oh my! To add to the confusion, the IRS isn’t even interested in certain records until you dispose of the investment (which could be decades for some investors).
Using our start-of-the-art online document storage systems at Premium Digital, you can make sure that all of your most important information is organized and ready to go when it comes to reporting and filing all your taxes each year. After all, the more organized you are, the earlier you can file…and the sooner you can receive your tax return!