It is something that we all hate to have to do but it is something that we must do – prepare and file our taxes. Depending on how organized you are throughout the year will determine how easy it is for you have your taxes prepared or how easy you make it on yourself to prepare them.
Organizing your taxes will not only help you and your family but it will make your CPA a whole heck-of-a-lot happier. Even if you do your taxes yourself, being organized will help to make the process a little less painful every year.
Create a Storage File
For us, this is a file folder that stays on my desk in our home office/basement all year long. As tax related expenses, mail, or documents come in, I place them in the file. Once a month, I pull out the file and go through the items. If there are any items that have not been added to our tax spreadsheet, I add them and then place a check mark or post-it note on the item. This lets me know what I have and have not accounted for. Come tax time, my life is a lot easier and takes me very little time to go through and double check numbers and then I can send off to our CPA.
Another key here is to create the file folder (or whatever system you decide to use) at the beginning of every year. This will make sure that any expenses that come in from January 1st to December 31st can easily be added to the file. Another reason why I love using a file folder is that it allows me to be a little lazy. I literally write on the inside of the file folder my husband’s mileage at the beginning and end of the year. This helps us verify his numbers through his log.
In addition to my file folder, I also have an email folder designated to taxes, separated by year. This makes storing any email confirmations of charitable contributions or e-receipts that we receive easier. I can easily print these emails and save them into .pdf files to file electronically and in our filing cabinet. (I am weird, I do not trust computers after the motherboard on our old computer died and took all our old files with it. So, I keep electronic and paper files of our taxes.)
Set Up Categories
I mentioned that I have a spreadsheet that I use to help me keep track of the tax expenses that we have. Some of the categories that I use are business expenses, income sources, charitable contributions, medical expenses, and interest earned/paid.
I then print off my category sheets from my Excel workbook and place them in front of my supporting documents, staple and store in my file folder. I also .pdf each sheet and save it with the scanned copies of our supporting documents. My CPA thanked me for doing this as it made his life easier and as a result, he lowered his service fee. 🙂
Submit All Your Paperwork on Time
If you use a CPA to do your taxes, please, please, please submit your paperwork on time. This will not only make their lives easier but it will make your life (and wallet) a lot happier. Submitting paperwork late usually results in higher fees paid to your CPA and could potentially result in you having to file an extension and paying a fee to the government.
Even if you do your own taxes, you will make yourself a lot happier by having all your paperwork ready when you file. Even though you may not have to pay a fee for submitting late paperwork to a CPA, you could still end up filing an extension and paying a fee to the government.
Stay organized all year long and do not wait until April to start preparing your paperwork. It will only give you a headache and be a lot more stressful!
Do you have system that you use that you just love?
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My CPA says that a lot of people just hand him receipts in a shoe box and ask him to sort everything out. That seems crazy to me, especially with their prices! I know that it’s a lot to tackle, especially as a self-employed business owner myself, but it’s a lot less money you have to pay a CPA if you have it all organized yourself. Like you said, have a spreadsheet with categories is best. Each month I keep track of expenses and income so that at the year, it’s not such a giant mess. 🙂 In fact, I was done with everything on my end to start the tax process on January 3. 🙂 Keeping track monthly keeps me sane at the end of the year. LOL
My hubs used to be one of those shoebox people and his tax bill was crazy. I guess he’s lucky he married me ;). You rock, per usual! 🙂
Thank you for the inspiration Jessi to be more organized! I always start the year with the best intentions and then life gets crazy. Although now that the blog profit is starting to trickle in, I know I need to keep track of everything each month so I won’t be hating myself next tax season! Thanks for sharing your techniques! 🙂
I am really dreading doing our taxes next year. I’m going to start getting organized right away so I can feel less stress. Thank you!!