Its that time again, tax time! For most, tax time is a stressful period. In a lot of cases this is made worse due to a lack of organisation, and the stress of ensuring the necessary paperwork is collected to claim everything you might be entitled to. Although tax time comes around every year, for most, preparing there annual return is just not thought about until a few months before the return is due.
There are means and ways of making tax time less stressful. Its necessary to be organised, have a system and make sure time is allocated on a regular basis so the paperwork is not left until the end of the year.
* Identify What to Keep?
Before your paperwork can be organised, its necessary to get an idea of what needs to be kept and therefore organised. There is often more then just tax related paperwork that needs to be kept, so it might be worth considering getting any non tax information together, and organise it at the same time.
For the purposes of tax time, it would be worthwhile looking over the previous years tax return and identify what expenses were claimed, and any income related documents that might also be required. Weather your tax return and the paperwork associated to it is straight forward or complex, the method of organising the paperwork for tax time is the same.
* Organise into Categories
Now that all the paperwork is assembled, it is recommended to categories the paperwork. Dumping all your paperwork into a shoe box, and just passing it onto the accountant at the end of the year is an option. However, from personal experience, you will not be have any fans are the accounting office. If your not keen on sorting out your paperwork, why would your accountant, and to make things worse your paying them to do it.
The purposes of getting an idea of what categories to file your paper work in, is to make a decision on the type of system that will improve your filing system. Its necessary to think about the quantity of the documents being filed in each category, and how easy it might be to locate individual documents.
An example of the categories that could be used for an individual with a basic tax return could be:
- income
- bank correspondence
- utilities
- tax deductions
- other
If there is a lot of paperwork for a particular category, split the category up further. Income for instance, could be separated into the types of income being received.
The combination of categories are endless, and its impossible to provide an example that would suit everyone. Instead identify the most important categories, and tweak if necessary by adding or combining categories as needed.
* The System
There are many ways to set up a filing system so paperwork is more organised. Choice a system that you are comfortable with, and will fit into your lifestyle.
Some examples of a filing system include:
- buying a folder with dividers or tabs identifying each category
- using a filing cabinet, with each category identified with a suspension file
- an expandable file, which is already divided up into sections, all that's required is to name each section
* File Now, Not Later
Like many tasks we dislike, we often try and avoid dealing with them. If a simple system is set up, it should be easier to put the file away as soon as its been received, rather then leaving it until the end of the year. If your not the type of person to put things away straight away, then it might be worthwhile setting some time away on a regular basis, no less then once a month.
If you paper work is organised at tax time, then the stress that usually occurs around tax time will diminish. By understanding what is needed, and creating a system that is simple and suited to your personal circumstances, tax time will be a dream rather then a nightmare.