Today it is one month until Christmas! And you know what the next big holiday is, don't you? That's right! The end of the 2019 tax year! Soon your mail boxes will be bulging with tax statements and important tax documents instead of holiday greeting cards and last minute Amazon gift catalogs.
If you entered the tax season last year struggling to dig up paper and digital financial records buried under an avalanche of tax statements from your mortgage company, bank, investment portfolio and divorce attorney, I'm sure that preparing your taxes were hard for you as well as your tax accountant.
The secret to smooth filing is ORGANISATION, and if you are a little bit lax in that regard, here are some suggestions to help you find and file all those necessary bits of paper or digital files.
1. Separate your tax docs.
All those tax records need to be filed so you can access them later. I suggest a folder, but you can chuck the whole lot in a shoe box or wire basket if you want. Just separate them when they come in with other mail to keep them together and easy to find.
2.Start a spreadsheet.
Next, create a spreadsheet that will allow you to categorize income, expenses, investments and other items that you’ll need for tax season. Be sure to make it so you can differentiate between types of expenses as different tax rules apply to different kinds of income.
For example, separate personal expenses for things like gifts, travel, and if you have them, office expenses. You can use one spreadsheet with different columns or one file with a number of different sheets.
3. Color Code it!
A handy way to make organizing more easy to use is by labeling carefully, adding notes and color coding your system.
- One color for personal expenses and another for business
- Different colors for different types of deductions
- Different colors for different investments and related expenses
- Color-coded files for various types of income and related expense documents
It may seem like overkill, but the more organized you are now, the easier it will be to both prepare your taxes and find information if you need it for your tax preparer or an auditor.