Dealing with taxes can be one of the most daunting chores a home office worker can face. This article outlines how you can get your tax information in order before the deadline creeps up!
Do you have to shovel your way out of a mountain of paperwork every April just to file an extention for your taxes? It might be time to revamp your system for keeping tax information organized.
Purchase Supplies
The first step in getting organized is to purchase the appropriate supplies. My reccommended list includes:
- A filing cabinet or milk crate
- Hanging File Folders
- Manila File Folders
- A Label Maker and Label Tape (It's surprising how much fun organizing can be with one of these gadgets.)
- Pens and Pencils
- Sticky Notes
- Graph Paper
- Accounting Software such as Microsoft Money or Intuit Quickbooks (Reccommended, but you can create a spreadsheet as well).
Once you have obtained your office supplies, keep the receipt (it is tax deductable). Finally, gather all tax documents and deduction-related items you have, including tax returns from the past six years.
Sort your Documents
The second action you will need to take in order to organize your tax information is to sort all of your documents. This is where the sticky notes really come in handy (don't create folders until you have sorted everything and know exactly what you need). Stack up your treasure trove of paper. Take the first piece of paper off the top. What is it? Is it an invoice? If so, place it in a stack for invoices. Is it a medical bill? Place it in the pile for medical bills. Here is a suggested category list for sorting (your needs may be different depending upon your situation):
- W-2s
- 1099s
- Paid Invoices
- Pay Stubs
- Interest Statements
- Dividend Statements
- Outstanding Invoices
- Dining out (business related)
- Home office expenses
- Transportation (To meet clients, travel for business, etc)
- Medical Expenses
- Real Estate - Buying or Selling a home, Interest from mortgage, tax assessments
- Child Care
- Student Loans
- Charity Contributions
- Educational Expenses
- Professional Services
- Tax Returns and Related information by year
- Adoption Papers or Birth Records for any Children
- Moving Expenses
Be as specific as you feel is necessary, but make sure that you have more than one or two items in a pile - otherwise it probably should go in a more general category.
Further Reading
My suggestions in this article are only one way of doing things. Once you get started, you may want more suggestions on organizing your home office for taxes. You may wish to read the following articles:
"Less Accounting Application for your Small Business" by Ange P on Bright Hub
"Home Office Equipment: Expenses You can Deduct on Your Taxes" by Thursday Bram on Bright Hub
"Using a Scanner to Clean and Organize the Home Office" by Brian Nelson on Bright Hub
Organizing Taxes
This is the second part of a three part series on organizing for taxes.
