10 Tips To Make Tax Season Easier
As the year 2007 came to a close, I took a day to close my financial books and prepare for the upcoming year.
This involved the process of archiving the paperwork from 2007 and preparing my filing system for the new documents.
As I prepared my filing system, I came across a list of tax tips in my Pendaflex filing box and thought they would be helpful to keep in mind as we all begin the new year.
1. Create a Checklist.
Your checklist should consist of categories such as deductions, business expenses, receipts, W2 forms and any changes made in the tax code. It works well if you create a separate folder for each subject, as that will make everything easily accessible when it is time to sit down and do your taxes.
2. Begin Tax Preparation Early.
At the beginning of each year, begin your new filing system. Label your files and keep them all in one convenient location. By starting the process at the beginning of the year, you will not fall behind in your filing and will reduce the chance of misplacing important documents.
3. Filing System.
There are many filing systems to choose from and you will need to find one that works well with your personality and habits. The system that I have been using includes a file box for each year that contains color coded hanging folders. Within each hanging folder I have labeled folders for easy reference and retrieval.
4. Sort as You Go.
Sort and file your papers as you get them. By taking the time to put your papers in their respective folder instead of letting them pile up, you will know right where everything is located when you are ready to start your taxes.
5. Keep a Business Diary.
If you are operating your own business, keep written documentation of all your business costs. At the end of the year, file this documentation in the folder with your business receipts. This process should make the auditing of your business much easier and reduce the risk of misplacing information.
6. Record Home Office Expenses.
If you have a home office, be sure to record all expenses related to the use of your home office. This should be separate from your other business expenses, and should include items such as telephone, heat, and electricity costs.
7. Keep Track of Charitable Donations.
Keep all of your receipts together from any charitable contributions during the year. While it might not be too troublesome to keep tabs on your regular donations, there will likely be irregular donations that you make to support a special cause and these can easily be overlooked.
8. Take Advantage of Resources.
The IRS website provides a wealth of forms, instructions and other materials. This information is freely available and can make the process of filing your taxes much easier to understand.
9. Consider Filing Electronically.
Electronic filing is becoming more and more common as taxpayers become more comfortable with using the Internet and tax preparation software. Some of the advantages to electronic filing include a reduced risk of lost or misplaced paperwork and if you have overpaid your taxes you will likely receive your check much sooner.
10. Store for Future Reference.
After you have filed your taxes, keep a copy in the folder with your receipts, W2s and other supporting documents. Store the folder in a safe place and you will have the information readily available if you need to refer back to your tax returns for any reason.