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8 Tips and Tricks on How to Keep Your Finances Organized for Next Tax Season



Tips and Tricks on How to Keep Your Finances Organized for Next Tax Season

Tax season can be one of the most stressful times. Every year we do our taxes, promising that we will be more organized and prepared for next year. Then next year rolls around, and we realize we broke that promise to ourselves. Many people keep their tax documents in junk drawers, cabinets, or multiple storage places around the house.

Now is the time to start organizing those documents and your finances as a whole. In this article, we’ll show you how organizing your finances can be easy. Here’s how you can organize your finances and keep them that way for the next tax season.

1. Know Which Documents You Need

8 Tips and Tricks on How to Keep Your Finances Organized for Next Tax Season

While we do taxes every year, we always seem to scramble to find the right paperwork when the next tax season rolls around. To stay organized for the next tax season, know which documents you need so you can start organizing them now. These documents include:

  • Social Security Number (SSN) or Individual Taxpayer Identification Number(ITIN)
  • W-2s
  • 1099s
  • Donations to nonprofits
  • Taxes for income, property, sales, and insurance
  • Other income-related documents, including alimony, jury duty pay, unemployment benefits, and social security
  • Documentation of eligibility for tax credits and tax deductions

2. Use an Accordion Folder or Secured Folder

Go to your local office supply shop immediately and pick up an accordion folder. The concept seems simple enough, but an accordion folder can help you keep your stack of financial information organized for multiple years, not just one year or next.

If your taxes are sometimes rather difficult because you own a small business, then you may want to pick up multiple accordion folders to ensure you have enough pockets to stay organized.

Label each section of your new folder with the year and place all of your financial statements and tax returns into those years. As soon as the forms arrive in the mail or you pick them up, make sure you add them to the proper folder.

The organization doesn’t stop after you file your taxes. Once you have a copy of your return, secure them in the folder as well. That way, you can easily reference past tax forms.

If you’re someone who would prefer to have fewer papers in the house, you can take this same concept and create multiple folders on your computer. If you’re doing this, it is vital to save your information in a secure folder that can be easily accessed, such as iCloud, or any other tools.

3. Label Receipts

Instead of crumpling up your receipts and sticking them in a jacket pocket, make sure that you save and label them. On the receipt, you can write down the reason for the expense. Doing this will make your life easier come tax season so that you know exactly what your expenses were.

You can do this more easily using tax software by uploading your receipts to make sure that you know exactly where they are.

4. Shred What You Don’t Need

The IRS can go back three years to audit a tax return, so you must have tax records from the last three years. It’s recommended to keep tax returns for seven years to be on the safe side so you can reference them when you need them. You can shred anything older than seven years, including:

  • Tax returns
  • Bank statements
  • Credit card offers
  • Mail with personal information

5. Organize Your Accounts

8 Tips and Tricks on How to Keep Your Finances Organized for Next Tax Season

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Most people have a checking account or savings account they access online. Many people have more than those two accounts and use multiple banks, which means you likely have multiple passwords. Create a secure document with a master list of passwords to assure you never get locked out of an account.

6. Set Money Aside for Taxes

If you’re someone that pays quarterly and annual taxes, such as a freelancer or small business owner, it’s good practice for you to set aside money for taxes each quarter and at the end of the year. If you work with an accountant, they will be able to tell you how much you’ll pay each quarter for the following year. This will give you an idea of how much you should set aside to cover each quarter.

If you don’t use an accountant, your tax software can calculate your quarterly taxes for you so you know how much you should pay.

7. Stop Mixing Personal and Business Accounts

Most small business owners have business accounts along with personal bank accounts, while others, like freelancers, may use their personal accounts for everything. If you find your taxes overwhelming, you can separate your business and personal accounts by creating a separate business account.

Even if you do use your personal accounts for business, you may consider opening up an additional checking account so you can put money into it for taxes and know you’re covered without touching your other accounts.

Make sure you never use your business accounts for personal items, and vice versa, so your finances are perfectly organized and easy to comprehend.

8. Use Accounting Software

We’ve already mentioned a few times in this article how accounting software can help you stay organized for the next tax season, but it can help you keep your finances organized year-round for the success and financial stability of your business. Tax software can help you look at your revenue and expenses in one simple dashboard without worrying about digging through paperwork or using a calculator.

No More Tax Season Scrambling

For many people, tax season is easy. They simply have a W-2 because they are an employee. For others, though, tax season is a stressful and difficult time. Instead of scrambling at the last minute to organize your finances, you can choose to keep them organized all year, which not only helps with tax preparation but your overall financial situation.

Matt Casadona has a Bachelor of Science in Business Administration, with a concentration in Marketing and a minor in Psychology. He is currently a contributing editor for 365 Business Tips. Matt is passionate about marketing and business strategy and enjoys the San Diego life, traveling and music.

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