Tax Tips That Help You Organize for Tax Filing Preparation

Avoid Tax Preparer Pitfalls Through Organization

As we’re entering the new year, we are once again faced with a highly critical yet greatly dreaded task of organizing for tax preparation. Every year we avoid the tasks of preparing for April 15, yet we could avoid most of the stress by adopting simple tools that can be maintained easily year-round.

Consider the key pitfalls of poor organization to tax preparation: we run the risk of misplacing important receipts, rack up hourly fees for tax preparers to wade through unorganized receipt piles and potentially miss out on maximizing our deductions, resulting in a lower return or higher payout of our hard earned money. In addition, we are unnecessarily adding a stressor in our lives that could have been avoided if we simply “had a system!”

You can quickly remedy your tax organization system in an easy, three-step process:

Step 1: Purchase an expanding file folder

Step 2: Set up a simple filing system for tax-related documents

Step 3: File your papers in the appropriate section

An expanding file folder with dividers and pockets enables you to categorize documentation. Smead offers a variety of expanding folders including a 12-pocket expanding folder ideal for tax document storage.

Setting up the folder by labeling sections into the following basic groups will be the best start to year-round tax organization:

  • 1099’s
  • W-2’s
  • Mortgage interest statements
  • Bank interest statements
  • Property taxes or other deductible state taxes
  • Investment statements
  • Charitable donations
  • Unemployment compensation
  • Educational and child care expenses
  • Home refinance/closing papers
  • Tax or refund notices
  • Business expenses (use one section for each expense category)

Label for the tax year and store in a secure location along with the past six years of filed materials. File receipts and documents as they begin streaming in the mail. If you prepare and/or file your tax return electronically, place a disk with backup copies of the files in the organizer for safekeeping. A secure storage location, such as a fire-safe box, will provide protection from potential harm but allow for easy retrieval of documents.

Now you have set up a system, made tax time bearable and likely saved yourself a few dollars by being smart about organizing. To begin next year organized, label another expanding folder and be ready with your system for next year’s tax time.