It comes around the same time year after year, but April 15th has a tendency to creep up on you—especially when you’re not ready. You can make tax time less stressful by simply planning ahead. The beginning of the year is a great time to organize your records and be prepared.
Whether you are preparing your own tax returns or having a professional tax preparer do it for you, organization is the key. Not only can it help reduce stress and save time, it can also make sure you get all the deductions to which you’re entitled.
Where do you start? “The first step to organizing your records is to separate them into two categories, “income” and “expenses,” says Tammy Costa, founder of The Organized Consultant (email: firstname.lastname@example.org).
The next step, says Costa, “is to sort through your records and separate them by type.” For instance, under the expense category you might have charity receipts, interest expenses, rental property expenses, and medical expenses, to name a few. If you have a home office, you might keep a list of office supplies, auto expenses, utilities, travel costs, and entertainment.
The final step in organizing your information is to create labeled file folders for each category that you came up with during the sorting process. “You may want to use different colors for each year or category to make the filing and retrieval process quicker,” says Costa. Combined with Avery Clear File Folder Labels, colored folders can give your tax information a clean and neat look.
While you’re organizing your tax files, take a few minutes to prepare your files for the next year. Chances are, you’ll use similar categories the following year, making your organization process that much easier. And, with your categories and files in place, you’ll be able to easily organize receipts and keep track of important papers throughout the year—and be more than ready to handle the next tax season.