Tax Money Information Organized

As you may know we are in tax season. The one time of year where we are forced to look at our finances and our disorganization that surrounds them. Luckily organizing our tax information is much easier than we think, and it is easy to put in place a system that helps us stay organized for the rest of the year.

This is the actual process that I use and have used for many years. I know it works as my CPA has told me I am one of the most thorough clients he has, and I know that it is because of my system.

Works for Two Reasons

1. I don’t deviate from my process. It is there for a reason and it works so I stay focused on it.

2. This is an all year process, not just something you do at tax time. Because I work on this year round tax time is actually easy!

The Process and Tools

Tax Collection Box

I have a project box that is for gathering tax items as they come in. With taxes it seems your paperwork flows in at all different times plus much of the information that we need is from transactions that happen throughout the year.

Because of this continual flow it is smart to designate an area that you can use as a catch all. I use a project box to gather my information. Because it looks nice I store it on the bookshelf in my office. This allows me easy access to it and I always know where it is!

Items that you may put in the box include donation receipts (which right before I put in the receipts from places like goodwill I make a list of what I sent and then staple it to the receipt. Here is my word file you would like it! Charity donation list ), or statements.

Files for File Cabinet

If I have an item that I might need to easily find during the year and don’t want to have to sort through a pile of papers I use a filing cabinet. Then when the year is completed then I transfer to the tax collection box. Following are the items I keep filed and then transfer:

Paystubs
Medical receipts (these include payment receipts for medicine doctors, etc. Statements from doctors and statements from insurance)
Bank Statements (most of these I receive electronically but still have a few paper ones).

In January take all these papers and put them into the collection box. I take this time to either staple them or clip them together. You can just toss them into the collection box if you don’t file, it is more important to have them consistently in the same place. Put them where you will know where to find them.

Money Software

I use Quicken to store my financial information. Once a week I download all bank information. Once a month I update all my investments. Then again at the start of January I go through and make sure all accounts are updated.

The nice thing about Quicken is that it is now so easy to download all your transactions. I can balance my accounts in about 5 – 10 minutes. Plus it keeps all of the data in one place for years to come. Most importantly for investments I am able to print reports for my CPA on when everything was purchased, when it sold, if there were any reinvestment, etc. Basically all my information is at my finger tips!

Then my papers become the supporting documents in case they are needed. Your calculations will go much faster!

I like Quicken because of the depth of reports and function it brings but there are many programs out there that accomplish the same thing. You could also look at mint.com as a free source to begin tracking your information. Again, it is more important to be consistent than to use one particular program.

Expanding File

I use an expanding file to store all of the tax papers when I am done. This is a great tool as each type of document gets their own section and it all folds up into one small easy to carry file. It also makes finding things in the future much easier.

When you need to apply for a home loan, or review what your deductions were or what medical expenses were you simply open the file, go to that section and pull out the information you need! This alone has saved me tons of time!

Storage Box

I use these tubs to store multiple years of the Expanding Files. I can usually fit about 4 – 5 years in one tub. I actually have our taxes from back to 1998, because they do not take up any space. These tubs are in our storage closet and don’t bother us. Eventually I will probably part with some, but really no reason to right now!

Label Machine

I use a label machine to label the expanding file and the storage box with the year. This makes it easy to distinguish between the years and figure out what is in the box. Information at my finger tips and easy to find – that is the goal.

Quick Review

Year Round put items into a collection box for taxes. No need to sort now – just collect all in one place.
Year Round update your bank accounts and investment accounts. This goes for small businesses to – don’t pile up receipts that you struggle to understand at the end of the year. Log them and file them at a minimum set aside the time once a month. Make it a date and put it on the calendar.
Year Round as you are updating your software file the papers that you still need, such as pay stubs.
End of year transfer all files to collection box.
End of year update all accounts in software.
End of year sort through and group into sections (paystubs, investment statements, medical information, etc). Transfer this data to your CPA’s organizer. If you don’t use a CPA or your CPA does not use an organizer simply gather your groups together and clip them together and take to your tax preparer or keep handy while using software.
End of year when your taxes are done, sort categories into the expanding file and label the tabs.
End of year label expanding file and storage tub.
End of year put the expanding file in storage tub.

That is about it, staying on top is the key and having a process will make taxes go much smoother!

Your Turn – what tools do you use to stay organized? Questions?