Now this is the time to begin preparing for tax season which will be soon upon us. If you begin now, you can break it down into small steps and do it bite size. Here’s a tax preparation checklist and some tips to help you get started:
- Begin by sorting your receipts into categories if you don’t already have them sorted. I use the categories of groceries, gas, eating out, housing, auto, and business related expenses. Keep the ones that you will be able to deduct off your taxes such as your business related expenses, home maintenance if you have a home office, etc.
- Tally up your paychecks to get a total of what your income should be and keep that handy to verify your W2 (if you are an employee) and/or your 1099 (if you are contract).
- Sort your bill records. Remove anything that is not applicable. Keep any bills that are business expenses. Keep your utility bills only if you have a home business.
- Shred any personal information before throwing it. You don’t want your cleaning to cause identity theft.
- Find any investment records that you have showing any new purchases, investments you cashed out, and dividends/interest statements.
- Pull out last year’s tax statements to give you an idea of any other area you might need information in.
- Begin price looking for your tax options. Do you want to hire a paid professional? Would you like to do it yourself by using software? If so, which one is going to work for you and your needs?
- If you do not know something about your taxes or have a concern, now is the time to research the question.
- If you didn’t use a filing system last year to keep everything organized, now is the time to set one up. Would folders work for you? Or an accordion file? Or a shoe box with dividers? Find a system that you want to try for the next year and keep it up each week.
- Did you use a tracking system for your expenses and their categories last year? Whether it was paper and pencil, spreadsheet, or a financial program, use it or begin using one. Use this time wisely to help you design a system that will meet your needs and help you save time in the coming years.
- Keep a folder specifically for the forms you receive in the mail at the beginning of the year. I like to keep a check list of the ones that I’m expecting handy, so I can begin crossing them off as they arrive. This will also help you catch it if someone misses sending you one. Once you have received all the appropriate paperwork, you can file your taxes.
- Set aside an evening or two (depending on the complication of your taxes), and compile all the information in your tax software if doing it yourself. Or set up an appointment with your tax professional. Plan when you are going to do this as early as possible. Don’t wait until April 10 to do it! Planning ahead will save you worry and having to rush around in order to beat the deadline.
Finally, once you are done with your taxes, keep a copy of everything you send the IRS – all the forms, any checks, and any included paperwork. Place this in a file along with any receipts and paperwork you needed to keep. We put them in small boxes at our home, tape them up, and label with the year. You will then need to keep this information for seven years. Find a place that is easy to get to, yet out of the way. That way if you need information, you know where to go.
Then sit back and enjoy a nice steaming cup of coffee or hot chocolate! Your work is done and Uncle Sam is happy once again!
Have you started preparing for tax season?
Photo by Usag Yongsan.
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