How to Stay Organized Throughout the Tax Year

Avoid the scramble and the unneeded stress of taxes by keeping organized all year long. Before even thinking about all of the receipts you may accumulate, know what you need to file and form a basis of data that will probably remain constant all year and perhaps years to come, such as your employment or mortgage. then, leave file space (more on that below) and keep in mind that you’ll be adding documentation as financial obligations and assets are accrued, sold, or shift in any way. Get ahead now with the following tips.

Gather Data Pertaining to Income

You certainly know your SSN by heart, but perhaps not your spouse’s or even your children’s. You also probably don’t know the Tax ID Number for your child’s daycare. These unique numbers may seem like readily available information, but they lay the foundation for everything that follows; you should keep these listed in a secure file to easily reference and apply. Misinformation can lead to a delay in processing, a delay in your refund, or a disallowance for a tax credit.

Of course, more complex data is required and should be gathered in as far advance as possible. Come tax time, expect to get a W2 from each employer and a 1099 if you’re a contractor. These are usually distributed mid-January for early e-filing. You won’t have much to worry about until you receive these forms, but things get more complicated If you’re self-employed. You’ll need to gather documents and receipts that account for business expenses continuously, such as mileage, supplies, utility bills for your home office, making sure to record their business purposes. If you fail to do so, you could be held liable in audits or tax court.

Regardless of the nature of your employment, safely keep all pay stubs, not just your final, and year-end financial statements to compare to final tax documents.

Don’t Forget Other Assets

Interest accrued in most savings accounts is taxable; you’ll need a 1099-INT for that. You will also need to file a 1099-DIV for stocks, mutual fund, or money market account. Although these forms will arrive closer to tax time, keep note of all statements and documentation possible for assets of any kind purchased, sold, and maintained over the tax year. This will allow you to properly match numbers and have a better view on the trajectory of your ownership.

Know Your Potential Tax Deductions and Document Them

If you have a mortgage on your home or any other property, the interest you pay is deductible, so anticipate that your lender will send you Form 1098 to file. Keeping this in mind, document easily left-out deductions like donations to charity and the aforementioned business tax breaks as they occur, allowing you to estimate what your total tax deductions may be. Adding these documents on a rolling basis means you won’t forget them come tax season, and also ensure there will be no surprises.

File Away All Documents, Statements, & Receipts

Whether you do it electronically or in an old fashioned accordion folder, maintaining all of your records in an organized manner is the key to filing without the headache. Regular filing folders will be sufficient for some, but if you’re a small business owner or a freelancer, putting together an electronic database will be a literal moneysaver; don’t rely on the ink of receipts to hold up or vague credit card statements to explain your expenses.

Regardless of what you choose, divide everything into sensible folders and add documents throughout the year. Some documents should remain in your records for years to come; this is where scanning and saving things electronically comes handy. At the same time, dispose of what’s no longer needed, like outdated copies, to assist in keeping optimally organized. You can be audited for up to 6 years prior, so to be safe, scan receipts and back them up on an external hard drive or save them on Google Drive. Here’s an organizational outline to get you started.

A quarterly or even monthly update of your records is wise, especially if you’re a contractor or self-employed; in addition, add copies of things like utility bills to your file as they come in. Even if you’re employment and/or financial situation is relatively simple, it will be helpful to maintain a housekeeping checklist, so you’re not scrambling to find documentation of a savings account or acquired stock. Save yourself time, money, and the hassle and start organizing now.


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