How Can Organization Save You Time and Money in Taxes?

by Tracey Hrica, EA Oct 14, 2022 | Share

The first step for effective tax planning is to organize that ever-growing accumulation of records in your desk drawers, closets, and other storage spaces.

Haphazard records can cause you to needlessly lose money to taxes. But on the other hand, the better the records you keep, the easier it is to search for opportunities, which is what tax planning is all about.

For many people, tax season can be a frantic last-minute scramble to find and collect all the documentation needed to file your taxes. Yet, every year you swear you’re going to be better prepared next year.

Get started organizing your tax records now!

Designate a spot where you keep all your documents. It could be a dresser drawer or shoebox; it doesn’t make a difference as long as it’s all in the same place.

If you’re tech-savvy, create a folder on your computer and immediately scan and save receipts and tax docs as you receive them. You can also create a spreadsheet where you track your income and expenses that can be tax deductible, such as child care and charitable contributions.

If you are a small business owner, using a spreadsheet, bookkeeping software, or outsourcing your accounting to track income and expenses is essential. 

Using an app to track business mileage is helpful as well.

There are many great options for organizing, so you can choose one that fits your style. It can make doing taxes more bearable.

When sorting through financial papers, err on the side of caution when deciding which ones to save and which to toss out. 

If you are just starting to tackle info from 2022, make the chore manageable, and reduce the likelihood of mistakes by limiting yourself to a single category of records at each sitting. 

For example, tackle all documents dealing with investments one evening, receipts another, and so on. 

Incidentally, this do-it-yourself undertaking provides valuable side benefits: less-cluttered storage spaces and a clearer picture of your financial affairs.

Here’s a checklist of the common items needed to prepare your taxes:

  • Wage and earning statements (Form W-2, 1099-R,1099-NEC) from all employers.
  • 1099-G Unemployment Compensation from the government
  • Interest and dividend statements from banks and investments (Forms 1099)
  • A copy of last year’s federal and state returns
  • Total paid for daycare provider and the daycare provider’s tax identifying numbers such as their Social Security number or business Employer Identification Number
  • K-1 from your Partnerships or S Corporation
  • 1098 Home Mortgage from your bank or lender
  • If Self-Employed, provide records of all income and expenses.
  • Rental property income/expense—profit/Loss statement, rental property suspended loss information
  • Health Savings account year-end form (8889)
  • Real estate taxes paid
  • Estimated tax payment made during the year, prior year refund applied to the current year, and any amount paid with an extension to file.
  • Charitable contributions
  • Tuition statements (1098-T)
  • Distributions or contributions to retirement plans
  • Alimony
  • Home office expenses
  • Business or charitable mileage log

If you have misplaced something, resolve now to reconstruct missing or incomplete records before they become hazy in your mind.

Taking a little time to gather and organize these records now can save you tax dollars in April!

About the Author

Tracey Hrica, EA

Tracey Hrica joined the firm in 1995 as a bookkeeper. In 2012, she earned the designation of Enrolled Agent(EA), which enables her to prepare personal and business tax returns and represent clients before the IRS. To maintain the designation of EA, she must complete yearly continuing education in the areas of personal and business taxation. Working closely with her clients, Tracey’s primary areas of concentration are new client onboarding, client communication, research, and QuickBooks support. As a QuickBooks ProAdvisor, she works closely with clients who rely on QuickBooks for the day to day running of their business. Tracey has expertise in both QuickBooks Desktop and QuickBooks Online.

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