I know, I know, I said it. And it’s only January. What the heck am I thinking? I mean, there’s almost 3 entire months until we have to file our taxes – why on earth would I bring up such a thing?
Because I hate them, that’s why. And the better-prepped I am NOW, the less stressed out I’ll be LATER. (This is my philosophy on most things, in case you didn’t notice before!)
So, in the spirit of being prepared, or ahead of the game, even, here are 10 things I do during the year to prep for tax time!
1. Save receipts
We itemize. So all year long, I’m saving receipts. Some I can’t do anything with, but most of them are saved! And yes, sometimes it’s a pain, but in the end I’m always glad that I’ve done it!
2. Sort receipts
Once I have a receipt, I have to place it in the proper category for itemization. I have a collection of jars for that purpose, as well as a collection of highlighters. Yep, this is a pain too, but still better to do it as they come than have to do all of them at once!
3. Maintain good files
As invoices and bills come in throughout the year, make sure you have a good filing system set in place. That way, at the last minute, you’re not searching for your cell phone records to deduct those costs from your small business. You already know right where they are.
4. Track mileage
I’ve done this in multiple ways. This past year, I tracked my deductible mileage by snapping “leaving” and “arriving” photos of my odometer with my cell phone, and transferred them into my business records at a later time. I’ve also kept a pocket planner in the car, and on the date I traveled, I marked it in the planner. I’ve employed a voice recorder system, as well.
5. Scan unnecessary papers into digital form
I HATE towards the end of the year when my filing cabinet starts to get a bit full and it’s harder to place additional paperwork where it belongs. So, I scan papers onto a jump drive. It’s organized into files and folders and cross-referenced and color-coded – that way, I can type one simple word into the search bar and it pulls up the exact document I’m looking for. Works like a dream and you get rid of all that nasty paper!
6. Back up files
Make sure that all your important documents are backed up – whether they’re on a CD as well as a jump drive, or you store them in a cloud or on a dedicated or backup server. BACK EVERYTHING UP. I cannot stress this enough!
7. Communicate with other household inhabitants
This may sound odd, but here’s an example: did you know that if you hold a student loan for one of your children in your own name, YOU can write that off on your taxes? That’s a good conversation to have!
8. Know an expert in the field
All of our tax information gets turned over to my cousin, who used to work for H&R Block and knows lots of experts in the tax arena. When she gets our information, she does everything she can, and then has someone even more experienced look it over. If I ever have any tax questions, or if I want to become an enrolled agent myself, I know just who to call.
9. Have everything else completed when the W2’s arrive
Your employer has until the end of January before they have to give you your W2, and it’s much easier if all of your other tax items are already together! Then you’re good to go, as soon as you get that W2!
10. File BEFORE the deadline
I mean, whether you’re getting a refund (which I hope you are!) or having to pay in (which we did last year, and that was NOT fun) would’t you rather go ahead and get it over with? Instead of waiting until the last minute, stressing yourself out and wondering what was going to happen?
I hope these help! What is YOUR best tax tip?