Maybe you’ve been filing your tax information away neatly in color-coded file folders all year. Or maybe you scanned and saved your receipts and other documents on your computer where you can find them in a second.
If that’s you, all you need now is your Form W-2 and a few other forms that arrive in January to file your return.
Most of us, however, aren’t quite that organized.
If you’re like most, you likely started last year with good intentions. But then life happened and all of your organization aspirations went out the window. If you spend a little time organizing our tax information now, however, preparing your return will be a snap.
Use these tips to easily organize your tax information:
1. Designate an easy-to-access place for tax documents
If the place you want to keep documents isn’t easy to get to, it won’t get used consistently.
Even if you intend to scan documents, you need a place to store them temporarily.
Consider choosing something you can reach with one hand, like a shelf or folder, even while holding a stack of mail.
If you don’t let that Form W-2 or Form 1099 hit the kitchen counter, it won’t get lost.
2. Group tax documents by category
Depending on the complexity of your tax return, you may want to use file folders, paper clips, boxes, or other methods to categorize documents.
Entering information in TaxAct is much easier if you separate your income, deductions, and credits information.
If you have one or more businesses, you’ll need to keep each business’ information separate as well.
3. Find last year’s return
Last year’s return is a great starting point for this year’s filing.
By looking at your return from last year, you can quickly see what information you probably need now.
In addition, you may need to use some information from last year, such as depreciation or inventory information, to complete your new return.
4. Start worksheets and lists for 2020
If you plan to itemize your tax deductions, a good rule of thumb is to start a checklist of questions to gather pertinent information.
For example, you may need to get tax information from your child care provider, or you may need to figure out the number of square feet in your home office.
You should also keep a record showing how you estimated amounts or allocated them between different categories.
Aside from being necessary if the Internal Revenue Service (IRS) ever questions your return, that information may be useful in future tax years.