I can almost see your gnashing your teeth and rolling your eyes right now. Nobody likes to do them. Unless you’re getting a refund like the recent HR Block commercial. The one with stacks of cash with your name on it! I wish.
If you are in the camp with most of us that dread doing them, here’s how I’ve made it, should I say…less taxing?
- Start a paper folder or an electronic one. I personally use both. I start this as soon as the beginning of the year. For the documents like W-2s and 1099s that come via mail, I’ll put those in a folder until everything arrives. I also use an electronic folder. One popular way of saving receipts is through Evernote. It’s great for saving tax receipts and documents that you may need later on. You can scan directly into the program from your computer, or even email documents to it like your statements.
- Watch for tax documents very closely. It doesn’t matter if these documents are coming via snail mail or electronically. I go on high alert around January 15th. For about a month or more, you really need to keep an eye out for various emails and mail that may impact your taxes. Check your mail thoroughly and don’t assume something that looks like junk is junk, and toss if before opening it and checking. Take the time to check all of your spam folders for tax documents. Sometimes they will end up there. If you don’t check, it may be a problem later when you get that little love note from the IRS.
- Use last year’s return as a reference. I keep last year’s return handy through a scanned copy. I also keep the whole document and supporting stuff in an actual file. That way I don’t miss a deduction I took last year. I also create a tax template. It’s a great tool to see that I have all the income documentation as well as receipts and deductions for various categories
- Start preparing before you see your accountant. I mentioned my tax template in the previous step. I have categories for business expenses, personal expenses and income. As this stuff rolls in, I record it, check it off and move to the next item. When all the blocks are checked I’m ready to talk to my tax professional. In order to create the template, take a look at your last tax return and record the main areas that affect you. Once I had my little tax template, I copy it and change it to the current tax year. If anything changes, I simply add it and copy it again as a new template.
- Work on next year’s taxes….now! I do this every year. I got sick of not having everything handy and ready. I use a service called Expensify. It allows me to record all my business expenses via email forwarding or an iPhone app to take pics of receipts. There are tons of these applications available through your phone or online. If you own a business then you can use a service like QuickBooks. The point is, I do my taxes as the year goes on. That way I have just a few hours of prep and voila!
I have so many things that stress me out these days. Hey, I’ve watched the stock market everyday for the last 22 years and that’s enough! The last thing I want is not having a repeatable, streamlined tax prep procedure. Get organized and you won’t freak out over your taxes.
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