Take the Pain Out of Organizing Your Taxes
By Cyndi Seidler
Year end, year out; not many changes for some people when it comes to preparing their papers for tax time.
You'll find them sorting through papers hoping to find all their receipts and other financial papers for taxes . In working with many people, I've witnessed first-hand the tax-time urgencies of collecting these tax papers, and it isn't a pretty sight.
Typically, we find receipts on shelves in closets, in sock drawers, on top of dressers, in junk drawers, stored away purses, lying on desktops, and mixed in with numerous other papers around the home. I would imagine that this annual routine is a complete nightmare for people who are trying to get everything together for taxes.
This type of situation only occurs when people haven't established systems or methods to manage their paper. While Professional Organizers can help educate and implement these systems, it is also quite feasible for people to do it themselves. In the long run, a lot of time and aggravation and money is saved.
Here are some tips to organize your tax-related papers and ensure you have everything you need for taxes:
Designate a place to keep all receipts. As you collect receipts when out of the home or office, put them in a particular spot in a wallet or purse. Make it a regular routine to empty the receipts from the wallet or purse and put them in the designated receipt place. At home (or the office), this place can be a special drawer, a container, an expandable category file folder, a file pocket, or any kind of file holder or small box.
Keep track of taxable expenses throughout the year. Every week, month, or quarter period, it is a good idea to log your taxable cash and credit card receipt expenses, bills paid, and duplicate checks (or check register items) on a spreadsheet. This is referring to a manual method because, with a financial management software, like Quicken (or QuickBooks for businesses), regular entries would be made from checks, as well as cash expenses and credit card purchases.
If you do this annually (at tax time), you'll find it more of a time-consuming crunch, but at least everything will be in one place and organized to tally up easily. With a computerized financial system, you'll be able to print up Profit & Loss statements in seconds with most of the information you will need at tax time!
Keep income and/or accounts receivable files. Income-related papers will include invoices and salary pay stubs.
Keep a file for each bank account. This will not necessarily help to determine itemized expenses, but it is a source that documents income and expenses. And, you'll need to keep these type of records for 7 years.
Keep a folder for each investment portfolio. The statements will provide the necessary information needed for filing taxes.
Make a file folder for each tax year. File away each Income Tax Return (a permanent record), along with some of the tax documentation for that year's filing (W-2s, 1099's, statements with annual interest charges, Profit & Loss statement or manual account summaries, etc.).
Archive year-end papers. My favorite method is to take papers from the folders and put them into large manila clasp envelopes, then store them in a storage bin (or archival box). Be sure to label each envelope with the contents ("cash receipts," "bills paid expenses, "bank statements, etc.). Also, be sure to label the outside of the storage bin / box with the contents and year(s).
To help you with preparing your taxes, Click here for this Tax Organizer form that may help you put it all together for yourself or your tax preparer.
For those who have to itemize their deductions, it is important to track your category expenses (known as a Chart of Accounts -- which is simply a list of your accounts, and is the foundation of building an accounting system). Click here for a Chart of Accounts for you to refer to for the type of categories relating to your documents (Note: the numbers are used as an identification system). Click here for a Chart of Accounts for QuickBooks (commonly used account categories).
Whether you use a manual system or a software program, a chart of accounts can be customized to your business.
By having a system to manage your paper and track your financial documents, it will be virtually hassle-free at tax time, guaranteed!
About the Author
Cyndi Seidler is an author, columnist, freelance writer, and organization expert. She contributes articles, advice and tips regularly to Organized-Living.com. Her company web site is: www.handygirl.com; personal web site is www.cyndiseidler.com.Click here for another article relating to preparing for taxes.
Copyright © 2006 Cyndi Seidler. All Rights Reserved.
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