Here’s a list of a few things you should do to prepare at tax time

If your thoughts are turning to taxes you may be interested in just about anything that will make the process easier. One of these things is almost certainly the process of getting organized. Not only will having your ducks in a row will make an otherwise painful process just a little bit easier, but it can also save you money. Here are the details.

Get your employment and retirement paperwork in order

There’s nothing more annoying or time-consuming than hunting for completed W2 papers or having to request that your employer send them to you again. The same goes for any other pieces of employment-related documentation that you need, including proof of health insurance or documentation related to any employer-related investment funds.

It isn’t really that hard to avoid an employment paperwork hunt. Create a file in early January and then, when you receive your paperwork in the mail, place it there before it goes anywhere else. This simple process can make a big difference in your experience come April 15th.

Unsplash/Kelly Sikkima

Track documentation of medical-related and dependent care expenses

If you have significant medical expenses or dependent care it is worthwhile to request deductions for your spending in this area. Consider everything that you’ve been paying including:

  • regular doctor, dentist, and specialist visits
  • surgeries and treatment for ongoing medical conditions
  • costs for medical supplies
  • costs for emergency treatment
  • pharmaceutical costs
  • costs for childcare costs of any sort while you work (including childcare during after school and school vacations)
  • costs for care for older relatives while you are working (includes adult daycare and in-home visits)
  • medical costs related to the birth or adoption of a new member of your family

As you look at claiming these costs, keep in mind that if you already pay these costs through a tax-sheltered plan, you may not be able to claim them in the same way, or at all, on your formal tax return.

Tracking business expenses, investments, and other financial details

Along with the categories we’ve already mentioned, there are a host of other areas that you’re going to want to have on hand to file taxes. These include any details related to costs paid for businesses you own including major moves that help run the business, employee pay and benefits, home office deductions, and smaller purchases like office equipment and supplies.

It shouldn’t be that surprising to hear there’s a significant benefit to keeping things organized as you go along.

Other paperwork you’ll need to gather includes documentation of losses or gains on a host of non-retirement based investments including individual shares in a company, real estate losses, mutual funds, and businesses you’ve invested in. In addition, you’ll want documentation that shows interest you paid on any mortgages in your name (including on your own home) and proof of how much you have paid for education either for your child or for yourself.

Tip for next year: Keep things organized as you go along

There’s one big tip that will do more than anything else to get you organized for tax time. Keep things organized as you go along. No surprise here, right? For business owners, this involves keeping your spreadsheets and other tracking software updated with income and expense documentation throughout the months rather than letting it pile up and inputting it all at once.

For everyone else, this likely means keeping a file for deduction expenses and putting your W2s all in one place once you receive them. These habits of good fiscal hygiene mean that you can skip hours of preparation (sometimes torturous preparation) that comes in the months and weeks before your filing deadline.

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