Tax time is right around the corner and chances are many are finding themselves scrambling at the eleventh hour to locate important financial documents. But tax time doesn't have to be burdensome if you plan ahead and stay organized all year long. There are simple ways to stay on top of personal finances that don't take up valuable time and can help make filing taxes easier.
An ounce of prevention is worth a pound of cure. So as you're getting this year's return ready it's time to develop a system you can use all year long. "Invest the time now to put your financial affairs in order to prepare for the future," Ann Diamond, Certified Financial Consultant, who conducts financial management workshops across the nation, advises. Ms. Diamond has developed the following recommendations for organizing personal finances throughout the year:
Invest in a small fireproof filing cabinet with a lock to hold financial paperwork so that all important documents are kept in one place. Color-code files according to category.
Credit card statements should be kept and arranged in order according to month. Since there are many types of expenses on each bill, flags allow tax- related expenses to be easily identified. It may be helpful to assign specific colors to expense categories such as yellow for home office expenses, green for rental unit expenses, etc.
Charitable donations, medical expense receipts, and other tax-deductible items should be marked throughout the year with sticky notes as they come in, to facilitate information gathering at tax time.
Send your accountant clear instructions. Placing flags on your tax information can help your accountant pinpoint information and return your taxes to you in a quick manner. The "file," "copy" and "sign here" flags communicate a simple message without the need for unnecessary written instructions.
If you prepare your own tax return, use flags on the return to indicate areas that need special attention or additional research before filing.
And perhaps most important of all, place a note on your mirror, computer and anywhere else as a reminder to mail your tax return no later than April 15.
Developing a reliable system for organizing all your financial documents can be an easy task with the help of careful planning. Organizing financial records is key to quick tax filing.
According to Ms. Diamond, "It is crucial for individuals to make time to create and maintain an organized personal finance system. By spending a little time each week or month organizing personal finances, individuals not only stay aware of their financial situation throughout the year, but also save energy and possibly money when preparing tax returns."