Every year you say you’re going to be ready for tax season, and every year there is a scramble to get everything you need together. You’re never sure which tax forms you will have to fill out until the last minute. Organized Taxes-
You will likely receive penalties and interest when you don’t file your taxes correctly. Unfortunately, even if the mistake isn’t found initially if you are subject to an audit – the oversight might come to light, and you might be landed with a huge tax bill, again with interest.
It’s time to put those lazy times behind you and get organized. Here are a few simple and actionable steps to help you get your Organized Taxes in order and feel confident in your filing.
One-Stop-Shop for Organized Taxes
Imagine you have some of the receipts you need in a box, others in a folder, and others in your desk. To add to that, you have some invoices floating around in your emails, others only in PayPal (or another payment portal), some printed, and some on your desktop.
It’s time to carefully go through everything you have and put it in one place.
Here is what you should do:
- Create a single folder and name it Taxes 2022 (and make a fresh one for each year after)
- Scan all of the invoices and receipts
- Add them all into the file
- Duplicate the folder and save it to a hard drive and cloud space
- If applicable, create paper copies and store them in a labeled box close to your desk
This single point of storage means you won’t have to search for documents and files when the time comes.
Perhaps your filing isn’t a simple process, and you have a range of documents that you need to have in categories. A folder with different compartments, which can be labeled, is an excellent hardcopy option. Create new folders within the main tax folder for each category for digital copies.
As a starting point, consider a folder for each of the following:
- Bank statements
- Paypal account statements
- Credits information
When you have more than one business, you’ll need to ensure that you do this for each separate entity.
Your deductions can become quickly confusing, so it can be beneficial to arrange those into folders too. Depending on your industry, here are some options for the organization of your deductions:
- Legal & professional costs
- Office supplies
- Shipping costs
Make sure you already understand the deductions that you are entitled to. It will make the process much easier for you to manage.
Remember that according to the IRS, you must keep your documents for at least three years – although they can check back well beyond seven if they need to.
Create a Checklist
Each business will have a different set of requirements for its tax situation. A simple excel sheet will usually do the trick.
Each tab has a different label like business, personal, travel (if applicable).
Then list the items that apply to your situation. A personal tab may look like this:
- Charitable donations
- 1098 form for mortgage interest paid
- Bank 1099 forms for interest and dividends
- 1095-B proof of healthcare
- W-2 forms from your business
Spend some time making sure you have labeled each form, then as you are completing records, you can mark off each item.
Spending one week before the tax deadline compiling everything is asking for a stressful and worrisome time. Searching for invoices, trying to match up invoices to payments on your account.
So instead of spending one-week scrapping paper together, spend an hour or two every week doing your taxes. Scan documents, add everything into the correct folders and files. Once you take control of your taxes, they will no longer be scary.
Your business taxes should be a well-oiled machine, but it takes some time to create a system and process that works for you.