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The deadline for filing your tax return is less than two weeks away. The key to a stress-free tax season is being organized all year-round. As you head into tax season, being organized won’t eliminate the need to pay taxes, but it can reduce the amount of taxes you owe and will significantly decrease your stress level. Here are a few tips to make this year's tax prep a little easier and make next year downright simple: Create a home for tax-related documents Most of the stress associated with tax preparation can be attributed to missing information. Rather than taking the risk of misplacing or accidentally tossing any of these important documents, create a home for all of the tax related documentation that you collect throughout the year. For personal taxes, these include the more obvious documents that you receive between January 1 and March 1 (e.g. 1099s, W-2s, interest statements, investment statements, etc.) as well as documents that you receive throughout the year (e.g. donation receipts, property tax statements, medical receipts, childcare receipts, etc.). This way it will all be stored together and easily accessible.
Create a system The system you create to house your tax-related documents does not need to be complex. In fact, the simpler, the better! For most people, all supporting documentation for a given tax year should be able to be stored in a single hanging file folder or an accordion file. It doesn’t take long to sort it when it is all together. If you would rather do some pre-sorting, you can setup a few manila folders. Most of your documentation will fall into the following categories: salary, real estate, investments, banking, childcare, medical, and charitable donations. If you own one or more businesses, it becomes more complicated. Work with your CPA or tax advisor to determine how they would prefer to see the information. Then create your hanging file folders accordingly. You still need a home for each type of information. When a business owner's tax documents are in chaos, chances are their books and overall company operations are as well.
Remember, the most important thing you can do to reduce stress this tax season is to collect all tax-related documents in one place throughout the year. Being organized for tax season helps you save time and money. By having the right documentation ready at tax time you:
- take advantage of every possible credit and deduction
- are no longer paying your tax preparer to sort through your "shoebox"
- avoid long lines at the post office
Everyone has a different situation and these tips are offered as guidelines to simplify tax time. Best wishes for a relaxing April 15th.
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