One of the hardest parts about doing your taxes on your own is simply gathering all the information you need! If you have a side hustle, income from self-employment, or are an investor, you likely have a significant amount of tax forms coming your way. It can be difficult to organize!
In preparation for the upcoming tax deadline, here’s how to get organized quickly with an income tax filer. (This will save you a lot of time moving forward!)
Plus, if you’re hiring a tax professional, they’ll be very happy to see that!
If you don’t even know where to start filing your taxes, check out our list of the best tax software!
Why regulation?
When it comes to filing your taxes, you need to take a lot of information and enter it all at once — accurately. Where does this information come from? Different places (which makes things difficult).
First, you’ll likely receive tax documents throughout the year — the bulk of which will arrive in December, January, and February.
Related to: What do I do if I lose late tax documents?
Second, you may have receipts and other forms separate from your tax forms. These can include copies of your property tax bill, automatic registration, receipts for charitable donations, and more.
Finally, you may have things related to your business or rental property that you need to report.
With all these different things to deal with, organization is key. An income tax notary is a great way to simplify the process of paying taxes (whether you do it yourself or use a professional).
Create tabs for basic categories
Your first step will be to get the binder tabs as well as the divider and create sections for specific categories.
Some categories you may want to include are:
- Income (including W-2 and 1099 income)
- Investment documentation (retirement account statements, dividend income, etc.)
- Real estate rental income and expenses
- Mortgage interest statements
- Education payments
- Personal information for everyone belongs to your tax return
Make these tabs customized to your specific situation.
Gather all your documents and place them in the correct divider for easy access. When next year comes, you can start filing documents as they arrive.
Here’s an example of my binder:
Create an expenses section
If you have any income from rental or self-employment, you’ll want to track your expenses carefully. Since keeping receipts in a file can be difficult, the best option is to make copies of your receipts, including several on the same page so you can easily file and organize your expenses. You can also include a plastic pocket divider for receipts if you don’t want to make copies.
Start doing this at the beginning of the year so you don’t have to dig through receipts at tax time. This is a lifesaver if you have a lot of expenses to deduct each year.
Create a folder for last year’s taxes
Unless you are filing your taxes at the same place you did last year, you will need a copy of last year’s taxes for verification purposes.
Even if you’re using the same tax preparation software, it’s still a good idea to be able to step back and compare different years’ taxes to each other.
Create a folder or a few tabs where you can put your income tax returns for the previous year. Remember that you must provide at least 7 years of tax returns.
Create a cover sheet
Along with all the documents, I recommend creating a cover sheet that includes everything you need to know and remember. The useful thing about cover paper is that you can reuse it from year to year and make sure you don’t miss anything from the previous year.
What should I include in my cover sheet?
- Wages: What companies can I expect to get W2s for?
- Income: business, rent, where?
- Interest: What banks do I usually get a 1099 from?
- Investing: Which brokerage firms do I usually get a 1099 from?
- Child Care Expenses: What is my child care information?
- Real estate: taxes, mortgage interest
- Personal Property Taxes: Vehicle Registration
- Donations: how much and to whom
- Estimated taxes paid: date and amount
I also include random things that may affect taxes. For example, when we got solar, I included all the information about our solar installation to make sure I would get the tax credit.
Do your taxes and file this year
Depending on how thick your income tax return is and how thick your binder is, you can move all of this year’s information to a new tab or you can save everything.
At the very least, I think it’s a good idea to at least keep a copy of your current income tax return in your file for easy access.
Start preparing for next year
Getting organized is actually half the battle. Once you have all your information together, the tax preparation software you use will walk you through everything you need to do. This system doesn’t take long to put together, but it can save you hours of searching for specific tax documents.
Keep your system together and filing your taxes next year will be a breeze!
