Getting Organized for Filing Taxes
The best way to make sure you don't get overwhelmed during tax time is to get organized and to stay organized throughout the year. Most tax season stress comes from digging up the forms, files and records that may have been cast aside because they weren't needed the day they arrived. Take steps to prepare a system to follow year-round. Having your documents organized and ready is one of the best ways to invest your time for a stress-free tax season.
Try this approach to getting organized: Take three folders, and label them for income, expenses, and investments.
Income
Every time you earn money, keep record of it by writing it on a numbered sheet in this folder, and continue to update it throughout the year. Any taxable income such as freelance work, jury duty payments, savings bond redemptions, gambling payouts and other earnings need to be accounted for on this sheet. As you receive paycheck stubs, store them in here. This folder is your record of any money made.
Expenses
Use the same filing concept as explained above, only this time, you're keeping record of all our taxable expenses and deductions. This includes:
- Mortgage Statements
- Investment expenses
- Child-care
- Employment-related travel expenses
- Receipts
- Utility Bills
- Medical Bills
If you have many deductions, you may want to get more organized and make separate folders within your expenses folder to keep your paperwork straight.
Investments
If you have a retirement plan that counts towards a tax deduction, or a Roth IRA, records of your contributions to those funds should go in here. If you're receiving funds from these plans, you'll need to store your 1099's in here as well to keep record of how much you withdrew.
