Chances are that, if you live in the United States, you've recently filed your taxes. For most, filing tax returns is a dreaded task, even when you expect a refund. Doing taxes requires a lot of time and energy, and often results in some frustration.
What if the process could be made easier? No, this post isn't about one of those get-rich-quick, never-pay-taxes-again schemes. This isn't even about insider tips from an expert in personal finance (which I'm not). This post is about keeping organized throughout the year in order to make tax time less stressful.
Think about it. How long does it take you to gather up all of your documents before you can even sit down with the software or forms? How many times do you have to break your concentration to go find yet another document that somehow you had forgotten about?
Start preparing for your 2011 taxes now, while the 2010 experience is fresh in your mind. Think about what sort of organization would have helped you. Tailor a filing system now that fits your need and then repeat it every January 1. For some, a single folder marked "2011 Taxes" may be all that is needed, a place to collect receipts and other tax-related documents as you receive them. Perhaps you need to create individual folders for income, deductions, and credits. Do you have a business or a rental property? You can set up separate folders for those, too. If members of your household file separately, keep a separate set of folders for each return that will be filed. While the options are endless, the key to making the task easier is to find the filing system that works best for your situation, set the folders up early, and file away your documents immediately as they come in.
Throughout the first month or two of 2012, for example, you'll probably be receiving all sorts of documents or emails relating to 2011, from employers, financial institutions, non-profits, and schools. It may be particularly tempting to ignore tax-related emails until you actually sit down to do your taxes, but then you’ll have to open your email, follow the link, enter your password, and should you have no recollection of what the password is, answer security questions, and wait for an email with a new password. Why not just get all that out of the way when you first receive the email? To make it even easier, print and file the document or opt to receive the paper copy in the mail. Not only will the document be right in front of you when you're doing your taxes, but you won't have to worry about trying to find it online several years later if you're unlucky enough to be audited. If you spread the time and energy of preparing to do your taxes across the entire year, your frustration come tax-time should be limited to interpreting the tax code, itself.
Once you've filed, though, you're not done. Don't forget to put copies of your returns in your files. Sure, if you e-filed, there are probably copies sitting on your hard drive that you can access at any time. But what happens if your hard drive crashes? Will you remember those files are there if you get a new computer? If you really don't want to print them, at least make sure that you back up the files.
No amount of preparation will take the stress out of tax time for many people, but a few simple steps taken to keep your organized throughout the year can at least reduce the stress. Happy post-tax season!