So, if you played your cards right, you filed your taxes on time this year. If so, good for you! But was it an organized and painless process? Or were you scrambling through files, drawers, shoe boxes and your briefcase or tote bag to find the papers to document and back-up those deductions? There is a better way!
Most tax advice centers around how to make the most of your deductions and ignores the problem that sabotages a large number of people each year: finding the proof to support those deductions. Most people hate the dreaded task of keeping track of receipts and other documents throughout the year. Yet, that is exactly what will decrease the stress come tax time and increase your chances of getting more deductions!
The best time to prepare for tax season is right after you file your taxes. Why? Because you are in “tax” mode. You just filed and, therefore, have a copy of your tax return handy. Or you still have the Turbo Tax software loaded onto your computer.
You need to create a system for filing all of the tax-related paperwork throughout the year. Take a look at the list of deductions you took, as well as the ones you did not qualify for. Start a hanging file folder labeled Current Year Taxes, using the plastic file tab as the main category. Now, create several cut folders to place within the hanging file folder. These should be labeled to match the general tax deductions you take.
For example, you can create a cut folder named Income. You would keep your pay stubs, W2, 1099s, and dividend distribution statements, gain an loss statements and annual statements from financial institutions in that file. You may also have a file labeled Charitable Contributions where you keep evidence of donations made. If you qualify for a medical expenses deduction, then keep a file for all of that paperwork. If you own a business, keep a file for Business Expenses Deductions. You get the point!
I highly recommend you use a label maker to label these files so they look clean and crisp, and are easy to read. The more professional your filing system looks, the more likely you are to use it! I use the Dymo LabelManager 260 because it is light weight, easy-to-use and produces professional looking labels every time!
Even if you pay your bills online and are a very active electronic user with regard to your financial life, you will still get certain papers in hard copy form that have to be maintained in order to fully support a tax deduction. Take the time to set up a Tax Center in your home and drop papers in their categories throughout the year. Come tax time next year, you (and your accountant if you use one) will be in a much better position to get those taxes done with the least amount of stress while maximizing your financial savings!
Full disclosure: This is sponsored content and I have been compensated to do this post. That being said, I do not blog about anything I do not believe in and Dymo did not edit this post or direct the content in any way.