If there’s one thing that is common to all of humanity- at least the segment that works and earns- it is the dread of organize your taxes papers and receipts at the end of an accounting year. The internet is awash with people who report that preparing and organizing tax documents is one of the inescapable miseries of life.
But, it doesn’t have to be this way.
While the process will probably not be as exciting or as joyful as packing for a vacation after six months, it can be made easier and less ‘taxing.’ Read on below to know how.
Organize a monthly check-in
Imagine trying to remember 365 day’s worth of expenses in one day with a deadline looming over your head. You have to get all of them right. It’s super stressful, but alas, that is what most people tend to do.
Instead of organizing a yearly check-in, however, go for a monthly check-in. Organize any receipts from the previous month into dedicated envelopes/ folders so that all your deductions are accounted for.
You can make categories like:
- Education costs: student fees, tuition, textbooks, and other required material
- Home and office expenses: electricity, gas, and water bills; home repairs, maintenance, and renovations; internet and phone bills; receipts
- Medical expenses: out-of-pocket expenses; health insurance premiums for you and your family
- Child care expenses
- Other expenses: charitable donations; moving costs; tax planning and investment expenses; work uniforms; laundry or dry-cleaning for uniforms and other work-only attire
30 days is the perfect time frame for recalling all these expenses without forgetting them. The system also isn’t so microscopic that you end up feeling like it’s tax day every day.
You might be the type to trust paperwork and have it all in order. But, the receipts might get lost, misplaced, or even fade away with time. As such, it is a good idea to have a backup at all times. Protect your receipts by keeping a digital copy at all times. A couple of options:
- Scan the receipts and save them in JPEG or PDF format.
- Keep electronic rent receipts
- Preserve PDFs of utility bills
Also, do not make the mistake of procrastinating these backups to ‘one day’ or tomorrow. Sometimes receipts are only available for a designated period. If you go searching for it after that, then the receipt will no longer be available. In that case, you might have to request it which can also incur special charges.
Do it now and save up on the hassle later.
This system takes care of the receipts as and when they arrive. Track your expenses on the go. Take photos of receipts, create digital backups, and then tally the hard copy of these receipts when the month ends. You can use a budgeting app like Mint to store your photo receipts.
Back it up once more
Your phone might malfunction because you dropped it in a bucket of hot water. Your laptop might fall to the ground. In both cases, your precious digital items would be lost and irretrievable.
Thus, after you create one backup, take the time to create another backup- this one on an external drive or to the cloud. Do it regularly, preferably on the same day as your monthly check-in.
Store it away
Ideally, it is recommended that you keep your tax documents for three years from the date you filed your original return or two years from the date that you paid the tax, whichever is later. If you deducted worthless securities or bad debt, then the number for keeping returns and supporting documents goes up to seven years.
So much paperwork to be stored away for 2-3 years will only end up cluttering your home and office. Hence, be wiser and book yourself a self-storage unit. Your documents will be in the safest hands possible.
The option of a unit would be helpful if you have other stuff to keep in self-storage, too. If not, then a simple utility locker will be enough. You can store your documents for as long as you want after renewing the contract whenever it finishes.
Sure, the tax season might be grueling. But the above tips have the power to redefine how good the process feels for you. We hope it feels smoother and more enjoyable.
Future you is going to be so so thankful.