If you live in the US, then you might know that this is the time of year when we start getting copious amounts of tax-related mail (both physical and electronic). It’s also that time of year when we shove that tax-related mail in a closet (or leave it unread in our email inbox), forget about it, then stress out on April 14th hoping we didn’t throw any of it away because we’re filing taxes at the last minute.
If so, then you and I are a lot alike. At least, we used to be a lot alike. That is until I decided I didn’t want springtime (aka tax season) to feel so stressful and developed a few simple strategies to help me organize my life so that filing taxes was easier.
Even if you’ve already filed your taxes this year, don’t worry! You can do these three things now and throughout the year so that you’ll have an easier time filing at the start of the next tax season.
1. Use the same tax software each year
I jumped between a few different tax softwares the first few times I filed. My goal was always to find the cheapest (namely, free) option, so it wasn’t a priority to use the same service each year. To be honest, I wasn’t really organized back then, so I probably didn’t even remember which service I had used the previous year. I really wish I had though.
Using the same tax software each year significantly reduces the amount of information you have to enter when you start a new return. That’s because most tax services have importing features that allow you to automatically add basic information that you added to your previous tax return to your new one. That saves you time! In addition, but some services will also store your previous returns, so if you ever lose one after filing, or need to quickly look up information from your last return (like your AGI), you can do that.
But that’s not to say you shouldn’t ever switch softwares. If you ever need or want to switch, check if the new one you’ve chosen will let you import your past information and/or returns from your old software. If so, that will streamline the change for you and save you time.
2. Put all of your tax documents in one place
I knew I was officially an adult a few years ago when I purchased my first file cabinet. Generally speaking, that file cabinet is where important papers go to die. But even if I never look at them, I feel so much better knowing that all of the docs I could ever possibly need are neatly organized in one place. I use a single folder to stash the current year’s tax documents as well as ones from the previous year, in case I need them for reference. As soon as I get a new W-2 or a charitable giving statement in the mail, I immediately put it in the folder for safekeeping until I’m ready to file my taxes.
If you’re like I was and generally have trouble finding all of your necessary tax documents come time to file, try keeping them stored in the same place. You don’t have to get a file cabinet, but even just placing those papers in a labeled folder someplace safe will be a huge help. And this goes for online documents too! Try creating a folder in your inbox for info that gets emailed to you, or use a cloud service to file and save information that you download from websites. Be sure to give your folders appropriate names like, ‘2020 Tax Docs’ and ‘2021 Tax Docs’ so everything is easy to find and you aren’t scrambling when it’s time to file.
3. Use tags and reports to tally up your spending
This was the first year I filed an itemized tax return, and I wasn’t sure exactly how to do it. But when it came time for me to figure out how much charitable giving I recorded last year, the Spending by Envelope in Goodbudget helped me figure it out in a matter of seconds. If I didn’t have that report, I would have had to find all of the giving statements that were mailed to me, and then manually added them up. And why do that when I don’t have to?
When you’re ready to file again, be sure to utilize your reports! With the Spending by Envelope report, you can skip fumbling through that filing cabinet looking for old receipts, and easily tally up your spending on things like IRA contributions, college tuition and fees, or charitable giving. If you have tax deductible expenses that happen across multiple Envelopes, try organizing them with tags. Tags are great for things like self-employment expenses, since those generally happen across more than one Envelope.
These are the tips that have helped make filing so much easier for me. What about you? Have any tips that help make filing easier for you? Leave a comment and let us know!