Tax time can take a lot of time to sort through receipts, file folders and old emails and determine what you should report and what you shouldn’t. Staying organized can help you get more credits and deductions, which translates to getting larger refunds. You can file your taxes online instead of hiring a tax preparation company. This means preparing the necessary tax forms as well as supporting documents.
You need to keep your physical records and electronic records organized. Physical records are pieces of paper that you get from work or in the mail or a hard copy of your electronic files that you printed. Electronic records are soft copies of your documents such as online statements, scanned documents, e-receipts, PDFs, emails and Excel spreadsheets.
If you are using physical records, you should file it away properly. Even if you’re more comfortable with electronic records, it is still important to keep them organized. Regardless of your choice, having a filing system is a must. Creating folders on your computer can help you sort through your files easily. If you are keeping physical records, you should have your documents sorted into folders.
There are different filing categories that you can use such as work statements, receipts, bank statements, car records, mortgage or rent statements, health records, utilities records, insurance records and donation records. Arrange your files in a way that you’re comfortable with. You can also try breaking them into sub-categories to make it easier for you to find the files you need. For instance, you can file your receipts by year.
You need to know the right documents that will be required for your taxes. When you know what documents you need and where you can find them, preparing your taxes will be easier. The basic documents that you will need for reporting your income include your W-2 from your employer and 1099 forms (for interests earned in your investing or savings account).
For listing deductions, you should prepare your 401K/IRA contribution statements, charitable donation receipts, loan statements and car registration statements. For other matters, you need to prepare your marriage paperwork and home purchase paperwork.
Taxes can be filed without listing your deductions. However, listing your deductions can help you get bigger returns. It also forces you to examine the areas of your life from the preceding year. When you list your deductions, you will most likely notice what you missed.
When you are organized, you can file your taxes properly and earlier. This also means you will get your refund earlier and avoid situations caused by poor state budgets. You may not be used to organizing your records, but this is a good time to start this new habit. It will not only make tackling your taxes easier, but it will also help you find things easily and quickly. You won’t need to deal with missing documents or any kind of mess since your files are properly organized.