It’s not too late to get organized this year!

Every year around this time I receive calls of “help!” with regard to helping clients get their paperwork in order for taxes. Here are some basic filing tips that bear repeating:

Like Christmas, tax time comes the same each year so there’s no reason not to be ready for it. I know that circumstances change with homes, business, investments, etc. But if you have the usual numbers ready to go, getting the totals on your tax forms should not be that difficult.

  • First of all, ask your accountant what he/she needs and what back-up information you need to save. Don’t just give her/him everything that may be related to your taxes or everything you gave last year, because often people give the accountant way more than they ask for only to pay a higher price for the accountant to sort and make sense of it. So give him what he wants and no more.
  • Now make files for those categories. I’m a big believer in specific folders for: Business Expenses, Medical Expenses, Investment income, Income receipts, charitable contributions, etc. Think in terms of your line items.  If you have one filed just called “Tax Stuff” you’re going to have to sort it next year anyway. You can make these actually hard copy folders or folders on your computer. Simply drop in statements and receipts all year long. At the end of the year you can tally and staple these receipts together, voila – no more sorting for the accountant.
  • If you have your own business or you travel for business, keep a mileage log in your car. Or use a mileage app. For every appointment write down the starting and ending mileage, total mileage and purpose of the trip. At the end of the calendar year, tally up the mileages and take your deduction allowed by the IRS. You can also use an app on your phone to do this.
  • Again, if you have business expenses for your work, use one credit card for only business purposes. If you have a card that offers a year end statement – that’s perfect – they will categorize your expenses for you! For miscellaneous cash expenses for business, just remember to get a receipt and drop it in your Business Expense file.
  • If your family needs to keep track and itemize out of pocket medical expenses, have a folder for those receipts as well. Or you could make all medical payments on one credit card, and use those statements for the year so you don’t have to tally receipts. You can keep another Medical file for each member of the house which contains medical reports, labs, diagnosis, etc. That you keep forever. The expenses file you can clean out each year.
  • No need to keep weekly paystubs once you get a correct W2 form. And no need to keep ATM receipts if you are balancing your bank account every month. The monthly statements will support the transactions.
  • Finally, once you have your tax “back-up” ready, pull it out of the filing cabinet and put it in a manila envelope marked with the year. In some cases you may need a banker’s box. Give the accountant what he needs and then file the completed return with all the back-up info. As you put in this year’s, shred the tax file that is 6 years old. *

*always check with your accountant about what you can toss – everyone’s circumstances are different but 6 years is a general guideline.