Filing: The Cornerstone for Successful Tax Preparation

If you have not already done so, it is important to start organizing files and documents in preparation for tax season. Of course, we have to wait for the W-2s or the 1099s to be mailed to us, but there are several documents that we can all prepare and compile throughout the year. This includes creating a spreadsheet (written or on the computer) of things that occur throughout the year. For instance a spreadsheet including the dates and monetary value of charitable donations and a separate spreadsheet for ongoing medical expenses and mileage calculations. Keep and file all of your charitable receipts as well as all of your medical bills and expenses. For instance, I created a "Charitable Contributions, 2012" file folder and began to file all of my receipts in chronological order. At the end of the tax year, I just have to print out my Microsoft Word Excel spreadsheet and include it with all of my receipts in the file folder. When I go to do my taxes, everything is in one easy-to-reach place.

Sorting paperwork in preparation for tax season. File documents throughout the year to minimize last-minute sorting and consolidating.  I hate the gut-wrenching feeling of loss when I cannot locate that one pivotal piece of documentation. 

In order to minimize stress and maximize time, I always create new file folders for each new year. For 2012 I have created several specific file folders. This way I have the year prepared within my filing cabinet and I can start filing right away. There is not one "correct" or "right" way to set up your file folders. You can organize your files chronologically or by subject matter. You can bundle your files by subject matter and then divide them chronologically. You can also organize your files alphepetically. You should create a filing system that works the best for you. For me, I have a specific tax section that is divided chronologically. I put the most recent year in front of everything else.

One final note--with the advent of the electronic filing systems (e.g. NeatDesk Document Scanner), organizing documents on your computer is becoming more prevalent. Please keep in mind that you should still keep and file important documents (yes, paper storage is still necessary). This especially applies to tax documents. Keep and file the originals.