Tips To Start Planning Next Years Return – Organize

On my last post about planning for next year’s tax return, I talked about reviewing your 2013 return and adjusting your W-2 withholding or estimated tax payments. Today I will address organizing your records so that your information next year will be more accurate and easier to find.

One of the keys to preparing for tax preparation is being able to quickly find your information. This step is greatly simplified if you have one place to store your data. Start with an large accordion folder with labels on the divider for each category of repeating expenditures such as auto/truck expenses, supplies, campground fees, business use telephone, etc. One division can be used for single, annual expenditures such as the vehicle mileage log, the annual mortgage interest statement. These expenditures may be entered into a manual spreadsheet, or into a computerized spreadsheet such as Excel, or Open Office system before saving in the accordion folder. Timely kept records are more accurate and better substantiated in case you are ever audited.

If you do not have the self-discipline or the time to enter each item, investigate one of the scanning systems such as Neat. It is supposed scan your documents and sort them into defined lists. I have not used the scanner myself but I am told, by some clients, that it works well. The only problem that I have read about is that it uses proprietary software, meaning that no one else uses that system and the lists that it creates cannot be exported to a different software such as Quicken, QuickBooks or Excel.

If you use a personal financial program like Quicken, QuickBooks or one of the “free-ware” programs, you can prepare a record of your spending habits, as well as, devise a budget for comparison and a review of your spending habits. With such a report you can set spending goals and control your money. You can prevent it from slipping through the holes in your pocket for unintended, spur-of–the-moment items. I feel that if you must keep records for preparation of a tax return, let the records do double duty and help you monitor your finances as well.