Every year I say I’m going to get started on my taxes early, and every year I end up in the same boat, filing them in late March, or sometimes just before the April 15 deadline. Something I’ve learned is that even if you put off filing until the last minute, you can still make it easier for next year by doing a few things as you are filing this year.
If you’re filing your taxes late and kicking yourself for not starting earlier, make the work you’re doing now pull double-duty by setting up your files for next year at the same time. If you take note now of the information that is difficult or time consuming to find, you can put practices into place that will make it easier in years to come.
When gathering your various forms of income from last year, set up a database to record what you earn this year. If you work a regular job and get a W-2 every year, this isn’t as important, but if you freelance, things get a little trickier. If you’re paid through a third-party source like PayPal, you might not even get a 1099 from the payee, so keeping your own records is imperative. Look at what info you need while working on this year’s return, and while it’s still fresh in your mind, create a spreadsheet and use it every time you receive a payment.
If you have a home office, some of the things that you can deduct will be the same each year, although the amounts can change, of course. If you’ve just gone online to see how much you paid for electricity each month last year, keep track of it month to month this year and save yourself some time later. After measuring the space you have dedicated for an office, take note of the square footage and keep that in your file with home office deductions as well. Don’t forget your water bill, internet, heating costs, etc., as some of those might also be deductible.
Receipts for Expenses
It can be difficult to remember what you spent on supplies and have to dig through receipts to see what qualifies for deductions. While going through that hassle this year, start a database to track expenses and file receipts in a large envelope or file folder. If you don’t want to take the time to log on and note everything on your computer, at least put the receipt in a manilla envelope and jot down the date and what it’s for on the outside of the envelope. That will still make things much more manageable at tax time.
Once a Procrastinator, Always a Procrastinator
If you’re like me, you might still end up filing at the last minute, but by having much of the information sorted and at your fingertips, filing your tax return will be less stressful. Whether you file your income tax return yourself or hire a professional, the information needed to file will be the same. Do yourself and/or your tax preparer a favor and set up a record-keeping system today.
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