As tax season approaches, many of us go into a mini-panic about our files. 365 days is a long time for receipts, pay stubs, investment information, and more to accumulate! Below is a simple five step process to follow for organizing your documents for tax preparation.

1. Gather all of your materials

Do you have all of your tax related documents in a central location? If so, take them out to sort them so that your tax preparation will be easier (or so that you can give them to the person who prepares your taxes in an organized fashion and thus SAVE MONEY.)

If not, begin the process of gathering the documents and create a system for collecting tax related items for the coming year to make life easier next time!

2. Do a broad sort into top-level categories

Once you have the documents together, sort them into BROAD categories, such as

  1. Medical
  2. Financial
  3. Income
  4. Expenses
  5. Business-related (if applicable)

Be sure to keep the sorting broad so it goes quickly. Don’t read the documents at this stage – just place them into the appropriate pile. You can more easily divide into subcategories once you have your top-level categories. It really helps to set a timer so that you can play a game of “beat the timer” when doing this top level sorting. It can often be helpful to ask a friend, family member or a professional home organizer to help lighten the load and keep you on track.

3. Break it down further

Now take one broad category at a time and subdivide it as needed. For example, after you have completed your initial sorting, you might break your financial category down into:
– Investments
– Bank statements (and other interest earning accounts)
– Mortgage, Home equity and other interest paid
– Charitable contributions
– Paid taxes (property tax, etc.)

4. Totaling and summarizing

Decide how you will total or summarize each category. If you are using tax preparation software, it will do all of the totaling for you. Otherwise, you might use a spreadsheet on your computer or if you prefer, just take a sheet of paper and list each item. Then add totals at the bottom.  Don’t have spreadsheet software?  You can use Google Sheets for free!

5. Make a backup!

After you have completed all of this work, be sure to make a backup. If you have done your work on a sheet of paper and have a scanner or copier, you can scan or copy your piece of paper to create an electronic backup. Do not let all of your hard work go to waste!  If you have a smart phone, you can use a scanning app such as Genius Scan to email yourself a copy of your handwritten calculations.

6. Bonus: Reward yourself!

Reward yourself for your hard work! It can be tricky (and feel like a chore) to make the time to get your papers in order, and it may help to set up a treat for yourself afterwards. Perhaps a workshop you’ve wanted to take, a concert, or something sweet from a cafe.

How do you prepare for taxes? Let us know in the comments!

Discover more ways to mindfully organize your home or office here! >>