Are your taxes organized?
Although most of you have already filed this year’s taxes (I hope). There are things you can do this year to prepare for next year so it’s much faster and easier. Whether you have an accountant do your taxes or you do them yourself, keeping things organized will make tax time a breeze.
What do you need to keep?
First thing to look at is what to keep? For me, I keep everything because I never know what I might need. According to IRS.gov you only need to keep 3 years from the date you filed your original return or 2 years from the date you paid taxes. However, I recommend keeping 7 years’ worth of taxes. I would hate to have the IRS decide they want to audit me 4 years down the road and not have my paperwork to plead my case.
How can you stay organized?
So how do you keep all those important documents organized? I keep a file cabinet for all my bills and a monthly file for all our receipts. Each month, as I pay a bill, I file the statements. If you do things electronically, you may be able to E-file your statements by creating a folder on your desktop or cloud and download the files to a folder. I am a Gen X, so I keep paper statements as well as some digital files. Receipts are kept by month and I keep them all. Never know what I can claim or what I may need to account for. At the end of the year, you will start to see all those crazy forms; 1099, 1098, W2, etc. I keep a main tax folder that simply says 2020 taxes. As these arrive, I put them all in the folder. This way when it comes time to do my taxes, I am not hunting those documents. I also take all the bill statements and receipts for the year and file them with my main folder. This makes it so easy to have everything together when I am doing my taxes. Not to mention, it keeps my files clean, as I only hold the current year.
Are you ready to File?
So now you have all your tax statements and paperwork all together. Time to file! I have used a CPA in the past since I have my own business, however I am back to using Turbotax online. This may not be for everyone. I have been doing my taxes long enough, I am comfortable with filing my own. If you do use an accountant or CPA, they will surely be grateful when you bring them a nice file of organized documents!
Once the filing is over, I recommend getting a banker’s box or file cabinet to keep all your taxes together. Once you are ready to purge your taxes, I recommend shredding. If you don’t have your own shredder, I would recommend getting one. They are not very expensive and can save you time and money in the long run. There are also services that will shred for you, for a fee.
Tax time can be painful but having your documents together and organized makes things a little easier. Having a cocktail after helps me as well! 😊