Tax season officially runs from January 1 through April 15. But calendar deadlines are deceptive. Face it: Tax preparation is a 12-month activity requiring discipline, organization and data, according to accountants and professional organizers.
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Fortunately, it’s never too late or too early to set up a system for tracking tax records, receipts and other paper work. Here are five tips for organizing your taxes.
1. Mental exercise: Tax preparation begins with mental preparation. “The first place to organize is our minds,” said Rivka Gerecht Caroline, a professional organizer with So Be Organized. Make a tax date by marking your calendar with specific times for starting the process. Build momentum by establishing a schedule for organizing records.
If you feel overwhelmed, break the process down into small steps, said Standolyn Robertson, past president of the National Association of Professional Organizers and owner of Things In Place. And remember to book time for a mental vacation, with reserved space for a hobby, sports event or a spa date as a reward for completing the process. This tax incentive will help you override procrastination, Caroline said.
2. Set up a system: Tax records can be collected in a variety of files, ranging from a shoe box to one of several electronic filing systems, Robertson said. Whether you select low-tech or high-tech tax preparation tools, it’s important to maintain a system for storing receipts and other paperwork.
“At the first of every year, set up a large envelope or folder titled with the ‘current year’ and start accumulating tax-related income and expense information during the year as you go along,” said Carol Sokolow, a certified public accountant based in Miami. Key documents include receipts and credit card slips for business expenses, major purchases, charitable donations and other notable transactions.
“Then at tax time throw all year-end statements in the same envelope or folder. You will be ready to prepare the return or meet with your tax preparer. Organizing will not be such a daunting task at tax time,” Sokolow said.
3. Do your homework: Get the most out of tax consultation sessions by doing your own grunt work. “You should use your accountant to prepare your taxes, not organize your paper work,” Robertson said. To make the process painless, she recommends sorting through receipts and other paper work while watching television or listening to music.
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4. Review the past: Use past tax returns as guides for the current tax season. “Last year’s taxes can be a checklist of what to look for this year,” Robertson said. If you hire a tax professional or a bookkeeper, request a checklist or a packet of tax preparation tips. There are also several places online where you can download tax preparation checklists.
5. Check your credit score. Prepare for a tax refund or a tax bill by requesting a copy of your credit report. A review of your credit history will help you set priorities for paying down debt and improving your credit score, said John Branham, a spokesman for TransUnion Interactive, a credit report service. “Understanding their credit situation now can help consumers create a plan to best use their refund or prepare to pay their tax bill,” Branham said.
Sharon Harvey-Rosenberg is a member of Wise Bread’s top personal finance blog network. She is the author of "Frugal Duchess: How to Live Well and Save Money” and a contributing author to ”10,001 Ways to Live Large on a Small Budget.”