It’s probably safe to say your home is barely under control during the least stressful times – but when tax season comes around, you likely give up on organization entirely.
In the chaotic rush to find important tax information, every horizontal surface in your home becomes covered in yellowed receipts, and every filing cabinet and desk drawer is upended in frantic searches for W2s and expense reports. At best, you have to eat on the couch for a few weeks; at worst, you forget to eat entirely during the chaos.
However, it is far from impossible to keep your home calm and under control in the weeks leading to April 15. The following tips will help you start organizing your tax information – and home in general – so future tax seasons won’t be nearly as hectic.
Know Your Income (and Expenses)
Though economists argue that there are much healthier (and more profitable) tax systems, the U.S. stands by its system of personal income tax – which is why it is vital you know how much you have coming in. By now, your employer should have sent you your W2, which you will definitely need handy for your tax forms. If you file jointly, you should hunt down your partner’s W2, as well.
Freelancers or the self-employed have a slightly more arduous task. Larger clients might send along 1099 MISC forms that detail some of your income, but you might need to supplement these with loose invoices and other documents demonstrating your income.
Further, you need to track down receipts and reports of business expenses and deductions, from mileage records to utility bills to health care costs. You need proof of every expense, if not because they work as discounts on your taxes then because the self-employed are more likely to be audited than traditional workers.
Store Important Documents Together
Once you have tracked down any important documents, you should spend some time coordinating everything into a usable system. If you aren’t doing your taxes right away, you want to make sure your paperwork stays organized until you have time to fill out your forms.
Receipts can be bundled using rubber bands or paper clips, and you might consider using folders to arrange each family member’s important documents. Then, you should choose a dedicated box or cabinet to stash everything until tax time comes.
Purge Previous Years’ Tax Information
To mitigate the relatively reasonable fear of an audit, most Americans hold onto their tax information for decades. Though it isn’t wrong to keep a few of your past years’ tax papers on file, there is no reason to pack your office with filing cabinets full of outdated tax data.
The IRS gives itself a deadline of three years from the date of a tax return to request an audit, but it does reserve up to six years for substantial errors – in case of extreme tax fraud.
However, if shredding such seemingly important documents gives you stress, you might consider digitizing your tax files to free up your physical space. Stored safely on the cloud, your tax information can live forever while you enjoy a cleaner home.
Grow Your Deductions
Though the calendar year might be finished, you still have a couple months to increase your deductions for the taxable year.
The deadline for contributions to your IRA is in the middle of April, and if you maintain a Traditional IRA, you can count those deductions on your upcoming taxes. Additionally, you can obtain an extension on Keogh or SEP accounts until mid-October, so any contributions you add are also tax-deferred and deductible.
Unfortunately, opportunities to receive deductions for donations passed with the New Year, but you should consider donating today to grow your deductions for next year’s tax season. The bigger your donations, the more likely you will exceed your standard deduction and put a serious dent in your taxes.
This is a good opportunity for you to finally rid yourself of that broken-down car or ignored family boat; charitable organizations in every state are more than willing to collect your large donations with little effort on your part. You can also declutter your closets, pantry, attic, and basement to find donations to increase your annual deductions.
Build a Tax Organization System for Next Year
Unless you enjoy the fearful flurry of paperwork every spring, you should consider implanting a year-round system to stay organized. For example, you can use a tracking app like Mint or Expensify to monitor your income and expenses.
Related receipts should immediately be scanned or sorted into appropriate storage containers.
Once you have completed this year’s taxes, you can seal all related documents in a flat envelope and label it with the appropriate date. Then, you can easily pick out tax packages you no longer need to keep your filing cabinet neat and tidy.
Because taxes occur so infrequently, it doesn’t take much effort to manage a tax organization system, but every April, you will be glad you did.