If you have earned money in the past year, you generally have to pay tax on it. However, as the tax code is not easy to interpret, it is important to keep as much information as possible about your finances in a given year. Let’s look at some ways to get and stay organized to make next year’s tax returns easier to file.
Keep Electronic Documents Whenever Possible
Most employers, brokerage accounts or others who pay you can send you a digital copy of a tax form. It may also be possible to obtain digital records of invoices, expense reports and anything else that is needed to file an accurate and timely return.
Computer Programs Can Help Fill Out Tax Return Documents
Filling out a tax return form can be a tedious chore. Therefore, you don’t want to undertake it more often than necessary. Fortunately, tax software programs can import data between federal, state and local returns. They can also import data from previous returns to your most current one. This reduces the odds that you enter the wrong social security number or make other simple mistakes on a tax form.
Label Your Records
Whether you store tax information digitally or keep it in a filing cabinet, be sure that it is properly labeled. Ideally, you will organize your files by tax year as well as whether the document is needed for a state or federal return.
Anticipate Your Tax Status for Next Year
If you have gotten married, divorced or had children, your filing status and exemptions could change. If you have received self-employment income for the first time, be sure to become familiar with the wider array of deductions you could be entitled to. Planning ahead can make it easier to determine which records to keep and which can be thrown away regardless of why your status has changed.
Have Someone Else Organize Your Information
In the event that you don’t think that you can keep your information organized, have someone else organize it for you. For instance, you could have a friend, attorney or tax consultant organize and store your records for easy access.
Know Where to Find Duplicate Copies
Your employer, a broker or a government agency will be able to provide duplicate copies of any tax records that you need to file a tax return. Therefore, you shouldn’t get too worried if you lose a form or other document. Instead, be sure to ask for another copy prior to doing your taxes.
Failing to file an accurate tax return could result in financial or other penalties. Even if you make an honest mistake, it could still cost you hundreds or thousands of dollars. This means that it is in your best interest to get organized and avoid making mistakes at all.