Paper Management – Now Where Is That Stuff I Need For Taxes?
What do you need and not need is always a question. I suggest first looking at your last year’s return to see what you needed then.
Probably Needs: 1. income documents (W-2 and 1099 forms) 2. expense documents 3. documents for any additional income like rental income or alimony 4. cancelled checks, receipts, or a spread sheet for additional expenses – this would include gifts to charity and medical expenses 5. If you paid estimated taxes, a summary of estimated payments and cancelled checks
Dont’ Need: 1. receipts for prescription drugs – instead go to your pharmacy and ask for your 2012 printout 2. receipts that are not tax related – like for snacks or groceries
Now, where is all this stuff?
I recommend having a hanging file at the back of your active file cabinet and labeling it taxes. Every time you receive a tax related paper – tax on car or house, donations, professional membership fees, bank fees – drop it into that folder. Don’t take time to sort by category when the paper comes in – just immediately drop it into that tax folder. When tax time comes, pull out your folder; look at last year’s tax preparation and check off what you have.
For receipt documentation, keep the receipts in envelopes by month. I also suggest you enter the amounts into QuickBooks or a spread sheet every week. At the end of the year, total up from the spreadsheet and then put the receipts into a large manila envelope. Label this envelope with the year. Since most accountants agree that you need to save the documentation and receipts for 7 years, each year when you archive the past tax papers, shred the receipts that are in the envelope for 8 years ago.
If you keep car mileage for your business, place a car mileage book in the car. At the end of the year, tear out the sheets for the past year and total the amount that was logged. Drop the mileage log into the same Manila envelope as the receipts.
Preparing the tax papers for your CPA will still not be fun, but at least the process will not be stressful and panicky.
Jonda S. Beattie Professional Organizer