We hate to be the bearers of bad news, but it’s time to start working on your taxes.
The good news is that it doesn’t have to be a major headache year after year.
When it comes to filing your taxes, organization is key. There are so many items to keep up with: W2s, 1099s, deductible expenses, receipts, etc.
If you’re starting your tax preparation off by sitting in front of a pile of papers, not even sure what’s what, you’re setting yourself up for a long, hard road.
So what’s the best way to counteract this?
Pro tip: Create an income tax binder.
How to Start Your Income Tax Binder
Let’s first talk about the binder itself.
Of all the information that you’re supposed to keep up with year-to-year, tax information is at or near the top of the list. So you’ll want to choose a binder that can withstand the test of time.
Buy a quality binder that will hold up throughout the years and keep your information safe. Avoid the cheap ones that will fall apart, lose important documents, and leave you scrambling.
In addition to the binder, you’ll also need index tabs for each category. Some sample categories include:
- Mortgage Interest Statements
- Education Payments
- Investment Documents
- Childcare Statement
- Deductible Expenses
Additional Sections for Your Income Tax Binder
Did you receive any self-employment income? Or maybe rental income? If so, you know how important it is to track each and every expense throughout the year. You can choose to do this by putting your receipts in a plastic pocket divider in your binder, or you can photocopy your receipts and create a section for them.
Also, it’s always a good idea to have last year’s taxes nearby as a reference or guide for preparing this year’s taxes, whether you’re doing it yourself or having someone else prepare them. Consider having a folder in your binder for last year’s taxes. In a pinch, you’ll be glad you did.
Okay, it’s time. Roll up your sleeves and get started putting your tax binder together today. First things first: secure a quality binder that will last.
For more organizational tips, check out our article: How to Organize Files with a Custom Binder.