Each year, you vow to be more organized, only to find that by tax time your desk is cluttered with tax forms, papers and to-do lists. With a little guidance and some helpful tools, you’ll be organized throughout the year, making typically hectic tax time a breeze.
Step 1: Designate a place for all your home office files & equipment
Disorganized rooms can be distracting, leading to lost documents and wasted time looking for them. Avoid this by labelling folders, bins, shelves and drawers, so you have a dedicated place for all your supplies and files. While you’re at it, you can also label your CDs, DVDs, USB drives, and portable electronic devices. Remember to include your contact information on higher-value items such as your laptop and personal digital assistant (PDA), in case they are lost.
Step 2: Sort, file, and toss
Now that your work space is in order, you’re ready to begin organizing your papers and labelling file folders. For each document, ask yourself the following questions: Do I need to keep this? If I need to keep it, where does it make sense to file it? What might I need it for later — tax purposes, warranty, budgeting, etc.? Do I need to make a copy/copies?
Step 3: Categorize your records for tax purposes
While you’re sorting documents and receipts, be sure to make a copy and keep a separate file for papers you’ll need for your tax return. Don’t miss out on claiming expenses and deductions because you misplaced or don’t have a copy of a key invoice. Sort your bills by subject, such as; office expenses, home improvements, health expenses, donations, credit cards, investments, etc. Label folders and files using a range of colours so you can colour-code for easy reference.
Step 4: Assemble your records for this year’s return
With your files now in order and up to date, it’s much easier to gather what you need for this year’s return — whether you are preparing the return yourself, or sending your documents to an accountant who will do it for you.
Step 5: Don’t forget your promise!
You want to stay organized throughout the year, right? The best way is to schedule a regular time and day each week, or each month, to sort through new documents. A good rule of thumb is to schedule about one hour a week for record-keeping.