How to organize your finances for an easier tax season

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Are you a last-minute taxpayer during the tax season or are you vigilant and prefer to prepare for the inevitable payment date early on? The tax season is arguably one of the busiest times of the year and the stress is almost toxic for accountants and taxpayers. If you’ve come under pressure every tax season, it’s time to better prepare for the tax season.

Tips for organizing the tax season

Here are some valuable tips on how to organize your finances so that you have an easier tax season.

Create a filing system

Photo by Maksym Kaharlytskyi on Unsplash

When it comes to tax season preparation, preparation is everything. Receipts are vital to the bottling process, and even if storing them in boxes in the basement is passable, it’s never enough. Organize your receipts into different categories that clearly indicate your spending patterns.

Having a folder or portfolio is a great way to stay organized and avoid facing a pile of papers during tax season. Keep a record of expenses related to outside employment, home, office, medical expenses, education, childcare, and even charitable donations. Breaking down your collection of receipts makes it easy to identify deductibles and settle all expenses, potentially realizing even greater savings.

Go digital

If you are aware that tax documents are filling your space, consider digitizing to save space and time. Digital copies of receipts are beneficial when filing your taxes as they can be easily accessed remotely.

To digitize your receipts and other tax documents, you should take photos or scan them. While electronic scanning can be expensive, the cost is justified as physical receipts are always at risk of being damaged or lost. When dealing with a bank or other provider, request electronic account statements and documents. With digital technology, you can store documents on hard drives or in the cloud, where they will be accessible for years to come.

Collect all relevant documents early on

Tax season doesn’t mean you can put your other responsibilities on hold. You still have to work, take care of your family and relax. To avoid the back and forth of creating your taxes, check that you have all of the required documentation. Do you have your W2s, 1099s or 1098 at hand? Make sure everything is on deck before doing anything.

Plan and update everything

It’s great to be organized with a filing system, but you’ll be rushing during tax season if you don’t update your files regularly. Add new entries to your files every week or two. When you get a receipt from your supplier, add it to the file and when you get a bank statement, paste it in the folder provided. Setting a reminder can help you remember when to visit the control cabinet or folder again.

Constant updates may seem like a chore, but by planning your entries early you can avoid the risk of last-minute panics or missing documents. One advantage of this strategy is that after a few weeks you will instinctively do it, which will make your life easier in the long run.

Use online tools

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There is an increasing use of digital technologies that make it easier to be tax compliant. If you don’t want to hire an accountant or just need to control some aspects of tax preparation, choose software that works for you and your budget.

Some popular online tax tools are Mint.com, Turbo Tax, Tax Act, and FreeTaxUSA, which support free and paid features. However, as with all tools, make sure that the program is authentic and encrypted to protect your private information.

The central theses

Last minute tax stress may seem inevitable, but keeping your finances organized can help you avoid unnecessary tension. The careful organization of the tax-relevant items gives you an advantage when preparing your taxes.

While these tips will show you the best practices for alleviating tax problems, they are not foolproof. If an approach doesn’t suit your needs, you can come up with a style that suits you. Nice tax season!

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