I am not a tax professional. I can’t help you file your taxes.
I can, however, help you set up a system that puts the necessary information at your fingertips when it comes time to either file them yourself or take them to your tax professional. It involves a little effort as the year goes along, but if you do it right, it shouldn’t take more than a few minutes here and there to avoid panic, frustration, and overwhelm come tax time.
Step 1: Make folders
- A physical folder to hold your paperwork (cheap paper thing bought on back-to-school clearance works great.)
- Electronic folders on your computer (I have a folder marked TEMPLATE, with sub-folders for charitable donation receipts, HCRA receipts, and business receipts; each year I make a copy of the root folder, change the folder name to the year, and have everything set to go with minimum effort.)
- An envelope for receipts (I realize it’s not technically a folder, but it serves a similar purpose.)
Step 2: Make a recurring list of forms to collect/actions to take
I do this in Toodledo because Toodledo saves my brain. I set each form/action as a task, due January 15th, repeat yearly from completion date, and in the notes section I list the URL I need to visit to get the form (along with instructions if the site is difficult to navigate).
My list looks like this:
- Taxes – mortgage
- Taxes – student loan
- Taxes – W-2 (company name – separate task for each)
- Taxes – 1109 (company name – separate task for each)
- Taxes – proof of child residency
- Taxes – proof of insurance
- Taxes – calculate business deductions
Yours may or may not look vastly different, but you can look through last year’s forms to figure out what you need.
You could do the same with a sheet of paper in your tax folder or a .txt file in your TEMPLATE folder, if that’s more your style.
Step 4: Stay on top of it
Here’s where the maintenance comes in, but I’ve made all this part of my routine and barely notice the time it takes.
- When you get a receipt you need to keep, mark it clearly before you leave the store. I have a highlighter/pen combo in my purse for this, and it only takes a few seconds to scribble a category at the top, highlight the relevant bits, and stuff it in the envelope I mentioned above.
- If you have recurring payments on your credit card (charitable donations, web hosting fees, etc.) make it part of your monthly bill-paying routine to check your statement for these and obtain an electronic receipt. (You could even make a Toodledo task for it!)
- Start an Excel spreadsheet, and note deductions monthly. List date, amount, store, description, and category (postage, legal fee, etc.)
- Note any mileage driven for business purposes. My tax specialist wants total miles driven, mileage on December 31, and total business miles driven. I set up a simple formula on my sheet to calculate it for me.
- If you need proof of child residency, keep an eye out for something useful as the year goes by that has your child’s name and your address. I used an appointment reminder postcard from the dentist.
- Likewise, anything else relevant to your situation. As soon as you have it, catalog it.
- BONUS: If you drive somewhere to have your taxes done, keep a copy of the driving directions in your tax folder so you don’t have to look them up every year.
Step 5: Find a tax professional you love
I know many people who file their own taxes with confidence. If that’s you, great! I will admit that while I’m clever with money, tax laws change so often that I am not one of those people. I’ve taken my taxes to Fox Tax for years and have only excellent things to say about them. They put out a brilliant tax organizer .pdf every year that is a breeze to fill in with the data I’ve kept organized. They let me work with them over e-mail (files transferred through a secure online portal), which is awesome because I’m not taking up a time slot someone else needs, it saves on gas, I don’t have to arrange child care, they can work on my stuff when they have an open spot, and I don’t have to get out of my pajamas.
Do you have any tips or tricks you use to make your tax preparations easier? Let me know in the comments!