There are not very many people in the world who like to do their taxes. Sure, we love to get the returns (when we qualify for them), but all the work, anxiety, and stress that comes along with taxes we could do with out. Well there is a way to make your tax time a little less stressful, and that is by organizing your tax records.
If you go to get your taxes done, and you go in with your tax records organized before hand, you will be amazed at how easy doing your taxes can actually become. Here are some simple guidelines that you can use to help you organize your tax records all year long.
- Collect everything. The very first step in organizing your tax records, is to actually have some records to organize. This means that you should hold onto anything that you get throughout the year that may have a bearing on your taxes. Got W-2's and W-4's? If so, hold onto them. Do you get copies of your pay stub? If so, you should hold onto those as well. Basically, anything that you can think of that may have a bearing on taxes, hold onto it.
- Separate. As you collect the records, you need to separate them. Place your personal financial information in one pile, while you place your spouse's information in another. If you have children who have an income (whether it is from child support or Social Security) then you should create a separate pile for them. If you are going to school, paying for someone to go to school, or own a home, then you should also create separate piles for each of them as well.
- Organize. After you have separated all your tax records into separate piles, it is time to organize them. Start with any of the piles that you wish, and then organize them according to subject and date, and place these in to folders. Any information that you have can be separated in this manner. For example, in your personal records you could have a folder for your pay stubs, with that broken down by date of payment. Other examples of folders that you can make would be things like house payments, business transactions, and investments. Do this as many times as you need to until all of the paper work has been organized.
- Take to a tax professional. When tax time rolls around, it is time to take your nicely organized tax records to a professional. Using a professional can help reduce the stress and worry that often comes with filing any tax returns. All you should need to do is drop off your tax records, and then come back later to sign the paperwork.
- Place into storage. After you have filed your taxes, it is always a good idea to place your tax records into storage. The past years should be stored somewhere that is easily accessible, yet will be safe from any accidental damage. All tax records should be kept for a minimum of seven years, and it is recommended that you hold onto your tax records for ten years. If you get audited, often you will be required to show your past seven years worth of records.