Yes, it's that time again. When your mailbox no longer brings you holiday cards but that dreaded tax organizer from your accountant. You put it in your office and stare at it everyday. Its place is right next to the shoeboxes that contain your tax receipts. And so it sits for a few months.
Then reality sets in. You have to file your taxes before April. You move your organizer and receipts to the kitchen table and spread out for a day of sorting and adding up numbers.
No one likes tax time. Especially the client who four years ago dropped off bins to my condo going back five years. I basically went through every box and categorized by year and added up all the relevant categories.
Having a backlong of unpaid taxes is more common then you think. Each year, I do quite a few projects in which I sit for hours and just sort receipts in year then category.
Tax time can be overwhelming to a lot of people. All that paper. What can I write off? How long do I need to save it?
Let me help you out. The most important thing is to know what you need to provide your accountant. You can either fill out the organizer that your accountant will provide, or give them your shoe boxes. If you give them your shoe boxes of receipts, they will charge you the labor to sort out the receipts. It runs from $30 to 100 per hour. Having an organizer sort your receipts, we cost about the same.
If you are a simpleton; you don't own a business, are a w2 employee, and don't itemize- God Bless you. Your taxes are easy! You can keep a hanging file folder in your files that is labeled "current taxes" for your donations during the year.
If you own a busines and operate as a LLC or a sole proprietor, then you have to itemize it all! This is what I do every year! There are several different ways to store your receipts (depending on the amount).
No matter what organizing system you choose, please make sure you have an accounting system. I am a big fan of quickbooks. Its very user friendly.
1. My business is pretty simple and I am able to keep all my yearly receipts in a accordian file. Each category is clearly labeled. I literally recreate the system each year and file the old accordian file. I also enter each receipt on quickbooks. At the end of the year, I print the tax report and I am done!
2. Create a filing system with a file for each vendor.
3. Utilize a scanning program to scan your receipts and store them by category. They can also be transferred on a disk at the end of the year to be placed with your tax files.
The more prep work you do during the year, the better off you will be at the end of the year! Tax time won't be tramatic for you. And you can recycle those shoe boxes!!