Preparing for taxes

Filing tax documents

It’s that time of year again when everyone has to prepare for taxes. If you are lucky you have already filed your taxes, but for the majority like myself, I need to start preparing.

WHEN IS TAX DAY?

Tax Day this year is Monday, April 18, 2016 (for those living in the USA). That is the filing deadline for IRS Tax Returns.

HOW DO YOU PREPARE?

Typically I already have a folder labeled “TAXES [INSERT CURRENT YEAR]”. I make sure to file documents I need for taxes in this folder. I also have a check list of the documents I know I will need for taxes year after year. I make sure those documents are also filed in the taxes folder every year.

At the beginning of the year, I typically buy two things from Staples:

  1. One or two boxes of 5-tab hanging folders
  2. One letter/legal file box

Filing Tax Documents

I then move all of last years files into the file box so when I’m done with taxes, I label the file box 2015 (last year) and then store the files in the basement.

HOW DO YOU FILE YOUR DOCUMENTS?

As seen in the photo above, I like to cut out the logo of each company that I have documents for and organize the files in alphabetical order. Because I’m a visual person it’s faster for me to see the file based on the logo and it also looks neater than using my writing even if people tell me that my printing is almost written like a typewriter.

Because of my filing system, it’s easy to locate any files that are needed especially during the tax season.

WOULD YOU HIRE AN ACCOUNTANT OR DO IT YOURSELF?

If you are filing using a 1040EZ form then do it yourself. Fill out the 1040EZ form and mail it in. But if your taxes are more complicated than a 1040 EZ form, I would hire an accountant. I’ve done both and personally I think doing taxes with your spouse can spell D-I-S-A-S-T-E-R. I’ve had many arguments with my husband during tax time and the stress it caused us was not worth it. I personally think the best thing we did for our marriage was hiring an accountant. If your taxes are complicated and if you have some extra money in your budget to hire an accountant I would highly recommend it.

WHAT DO YOU NEED TO DO IF YOU DECIDE TO DO YOUR TAXES YOURSELF?

  • Gather these documents that you will need for taxes (ignore the forms you don’t normally receive regarding income and expense related documents)
  • Purchase Intuit’s TurboTax to help you get your maximum tax refund. It’s like having an accountant on your computer guiding you through the tax process. TurboTax double-checks your tax returns to make sure there are no mistakes and the calculations are accurate.
  • If preparing for your taxes gets more complicated even after using TurboTax, I would definitely hire an accountant and budget for it for the following year.

WHAT DO YOU DO EVEN IF YOU HAVE AN ACCOUNTANT?

You can gather all your paperwork and receipts and give it to your accountant to figure it all out. But for me, I personally locate all the paperwork that my accountant needs. I then scan the documents into a PDF file if it already isn’t in that format and send it over to my accountant. I also create an income and expense spreadsheet to make sure that the numbers are correct based on the paperwork and receipts I’ve found. I try to organize the documents so it’s easy for my accountant to find and input the information. My accountant typically give us a discount every year since the documents we send are organized and thorough. It typically takes me two to three weekends to work on. The hardest part is getting started.

HOW LONG SHOULD I KEEP RECORDS? (from IRS.GOV)

Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.”

Since all the file boxes are sorted by year it’s easy to go through the files and get rid of file boxes that are at least 8 years and older. Make sure to shred all documents using a criss cross shredder. My husband typically gets my kids to shred the documents. Once all the old documents are shredded and thrown away you can recycle the hanging folders and file boxes to use for the upcoming years.

I’m not looking forward to working on taxes this weekend, but if I do baby steps, I know I’ll get it done eventually. How do you prepare for your taxes?

2 Comments
  1. Claire 2 years ago
    Great piece of advice. Have you written more about planning the finances? I am new to your blog, so asked. Also, if a person plans to manage the taxes by oneself, what kind of documents and accessories do you think one needs? What are the things that you think must be recorded?
    • Author
      Jen 2 years ago
      Hi Claire, Do you mean how to budget? So far I've written a post on living below or within your means (http://jenonlife.com/lifestyle/finances/live-within-your-means/). You can also check out this post (http://jenonlife.com/lifestyle/finances/save-money-with-oprahs-debt-diet-action-plan/). The rest of my posts regarding the finance topic are here (http://jenonlife.com/lifestyle/finances/). If you are managing your own taxes, I would recommend purchasing the TurboTax software to help you do your taxes. The software helps guide you on what you need. Also this post provides a checklist of documentation you will need when preparing your taxes. The list is comprehensive so if you don't have certain forms that you don't receive ignore those forms for income and expense related documents. Again, I'm not an accountant but used to use TurboTax when I would work on my taxes myself. Hope that helps. Good luck with preparing your taxes.

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