3 Tips for Organizing Your Taxes Throughout the Year

April 25, 2012 | By: TaxCure Staff

get organized with your taxesMany of us think of tax time only once a year for a few weeks or months as we frantically try to gather all of the documentation needed to file taxes. If you stress out during tax season, you can make things easier going forward by organizing your tax information year-round.

Here are three tips for keeping your tax documents organized year-round:

1. Consider Your Likely Deductions and Credits

Your first step is to plan ahead. Consider the likely deductions and credits you will take throughout the year. If you know that you will be taking your kids to daycare, prepare ahead of time, since you might be eligible for a tax credit. Keep track of what you spend, as well as make sure to get the tax ID number for the childcare provider.

You can also keep track of deductions. If you know that you will make charitable donations, prepare to request a receipt. If you will be driving for business purposes, keep a mileage log in your car. Look ahead and determine what events and expenses during the year might result in deductions or credits. Be aware of your situation, and what’s coming up. Prepare ahead of time so that you can have what you need to keep the right records.

2. Set up a Filing System

Next, set up a filing system. It’s best to keep things organized as you go along, and a filing system can help. Have a file labeled “tax receipts,” or something similar. As soon as you receive appropriate documentation, immediately file it away. You can make it even simpler by keeping the file somewhere that is easily accessible, such as in a document holder on your desk, or in a hanging file in a convenient drawer. That way, it’s easy to simply put the receipt where it belongs – almost without thinking about it. Later, when you are gathering your records at tax time, everything you need is right in the folder.

You can also put other tax documents in the folder as they arrive in the mail, from your W-2 to your mortgage interest statement.

3. Digitize Your Records

For those interested in quick access, and a paperless office, digital records can help. Create a file on your computer, or in the cloud, for tax documents. Scan in the documents and save them. You can also use applications, like Shoeboxed, that help you store digital versions of your receipts. These applications allow you to use your smartphone to take an image of a receipt and then it is digitally filed the way you want it.

To be safe, though, it’s important that you protect your sensitive information. You can encrypt folders and password protect them. Also, don’t forget to ensure that they are backed up regularly; you don’t want to lose your documents in a computer or server crash.

With a little planning ahead, it’s possible to keep your tax information organized all year. Take a few minutes each month to stay organized, and you’ll save hours during tax season.