Take the Clutter—and Stress—Out of Tax Season
It’s the time of year for a perfect storm. No, we’re not referring to the wild and unpredictable weather, but rather the clash of pre-Spring Cleaning clutter and annual tax documents. As organized and prepared as we think we are when tax season rolls around, it almost never fails that we find ourselves dealing with piles of receipts, pay stubs and forms.
Unfortunately, this disorganization is costing you time, money and peace of mind. However, the good news is that it can all be changed with a little planning and organization. To help you get through the current tax season and prepared for next year, we’ve compiled a list of tips that we like to call the 3 P’s: Planning, Paper and Process.
Planning: The issue at hand with tax time clutter is typically lack of planning. Tax preparation shouldn’t be looked at through a small window of time but rather with a panoramic view of the entire year. Set up a monthly filing system of documents needed for your annual tax forms. Depending on your style and preferences, you can do this one of several ways. For example, organize by categories (e.g., income, investments and deductions) using large envelopes, expanding files, or organizers designed specifically for tax materials. Color-coding is extremely beneficial for this type of organization as well.
While there isn’t a single style that works for everyone, we recommend some type of year-round filing system. This helps lower your risk of errors and keeps your stress levels at bay. Include regularly scheduled updates (e.g., weekly or monthly), breaking tasks down into manageable pieces so you don’t get overwhelmed and they don’t snowball out of control.
Paper: The tremendous amount of tax time clutter is a result of the staggering amount of information involved in the process. While getting rid of documents is typically recommended in de-cluttering, we suggest erring on the side of caution for tax materials. Keep any records that could be needed for tax preparation—you can purge unneeded documents and materials after you’ve filed. If you are an owner of a small business or self-employed, it’s likely that you’ll be required to keep even more documentation than individual filers.
Following are examples of tax documents individuals should maintain throughout the tax year. They include but are not restricted to:
• Mortgage interest and property tax statements
• Bank interest statements
• Investment statements
• Medical and charitable donation receipts
• Account registers
Many planners and organizers have sections where monthly records can be maintained. Keep and file these sections as well.
Process: The process, in essence, is putting all the elements just discussed into motion. The key is to keep the process moving by sticking to the plan. Use your calendar, checklists and reminder tools like Post-it® notes to stay on track. Once tax time is here, make time to do your taxes by scheduling appointments for yourself. We suggest ½-hour to 1-hour blocks—remember, you need to keep things manageable. Plan accordingly to meet the April 15 deadline (or earlier, if you choose), and keep on pace by setting milestones that you can check-off your list of tasks as you go.
And don’t worry if you get hung up in the process—help is readily available at www.irs.gov. Plus, we recommend going to a tax professional if you’re unsure about anything on your return.
By eliminating and consolidating cluttered tax document files as well as setting a solid plan and process, you reduce the chances of making errors on your tax return. When you follow the Three P’s, the result could easily be a Fourth P: Productivity.