Tax time is often stressful for a number of reasons. Taxes are, of course, themselves a bit of a headache with rules, regulations and conditions that change from one year to the next. Keeping track of your tax information - work income, receipts, bank statements, etc - can also present a problem. At the Williams Tax & Bookkeeping office, we’re used to people coming in with piles of papers and in need of help. You can always call us when you need advice on how best to organize your tax documents but we’ve also come up with 10 steps to keep you on track.
1. Start Small
Don’t worry about organizing the past, instead focus on today. Whether you’re starting right at the beginning of a tax year or mid-season, simply begin by organizing the receipts, statement and other papers you currently have on your desk. This will set up a basic framework you can use when it’s time to begin organizing those boxes of papers in the closet.
2. Use What Works
When most people think of organizing they think of file folders in drawers, but that system doesn’t work for everyone – or every item. If you find folders work for statements, great. But maybe you prefer to slip them into a binder and divide them with tabs. Enveloped work well for tracking receipts and you can dedicate one envelope to each month and collect them all or use different envelopes for different things. Experiment to see what works best with your own style.
3. Make it Easy
If you travel a lot or purchase many things for work on the go, keep your receipts envelope or folder in your car or in your daily bag. This will make it easy for you to keep these smaller (and easy to misplace) items where they belong.
4. Start a Relationship … With a Tax Professional
The first step in being on track is, of course, to have a tax preparer or accountant with whom you can establish a good working relationship. If you’re at a loss as to how to find a tax preparer who can help in your situation, begin by finding a tax professional for organizing your taxes first. He or she can help you get a clearer picture on the kind of help you need based on your personal tax situation. Then they can help you to find a tax preparer to fit those needs.
5. Check in With Your Tax Preparer or Accountant Quarterly
After you find a tax preparer for organizing your taxes and you know the kind of service you need going forward, maintain that relationship on a regular basis. Ideally, you’ll want to touch base with your tax preparer or accountant on a quarterly basis. This will help you stay on top of issues such as paying estimated taxes, checking that you are on top of your accounts and ensuring you’re ready to go come filing time.
6. Keep Personal and Business Taxes Separate
Even though you’ll tackle your taxes all at the same time, it’s important to keep them separate during the rest of the year. This will make it easier to identify potential deductions once you find a tax preparer to work with at the end of the year. If there are receipts or documents which could be applied to either personal or business, maintain a separate folder or envelope. Your chosen tax professional may choose to prepare dry run returns that use them in each way in order to see which method gives you the best result.
7. Keep Everything
Not sure if an expense for your car, travels or other expenses will make a good deduction? Keep it anyway. Holding onto receipts and not needing them at the end of the year is better than realizing you could have used a deduction if you hadn’t used that gas receipt as a way to throw out your gum.
8. Don’t Forget Charities!
While many people are happy to give to charity, few realize that they can deduct both financial and tangible gifts. If you donate money or goods, get a receipt from the charity. Financial donations can be used at face value, obviously. For goods you donate, check what the monetary equivalent is and have the charity include that amount on the receipt. If you volunteer your time, ask your tax preparer about deducting the mileage on your car going to and from the volunteer location.
9. Have a Place for Unknowns
As you go through the year – or even the quarter – you’re bound to encounter questions regarding your taxes. Keep a list of issues to speak to your tax professional about and file it with your main tax file. For some this may mean keeping it in their personal organizer and for others, it means housing it with the forms they fill out on a regular basis. Just keep it in a place that’s easy to remember and easily accessible so you can jog your memory when you meet with your tax preparer.
10. Know When to Archive and When to Shred
It’s a good idea to keep tax records for a few years, but what do you really need to keep and what’s ok to shred? The answer to this question can vary from one person to the next, so make it a part of your regular discussion with your own accountant or tax professional. Archive what needs to be kept either in your home office or in another secure location. When you get the green light to discard some documents, don’t jusy throw them away – shred them!
These tips can help you get and stay organized through the year. This will help when it comes time to prepare and file your returns. Get in touch with the professionals at Williams Tax & Bookkeeping, conveniently located in Benton to help sort through the paperwork and determine which deductions and filing procedures are the best fit for you this tax season and in the years to come.
Williams Tax & Bookkeeping