How to organize for tax time now

Tax time is one of the most hectic times of every year, but if you follow these tips in getting organized before tax time you won't have the year end stress of trying to do everything at once.

Tip one:
Create the files that you need. Although this sounds really simple and it actually is many people do not do it because they overlook it or they put everything into one huge file. This is great if you only have a few items, such as pay stubs, but when you are organizing your tax records for a business you need to have multiple files to store all of your paperwork. If you itemize your deductions you should have a separate file for each deduction. You should also have a separate file for your business expenses, such as utilities, payroll, etc. Keep it all in one spot that is easy to access, such as in a filing cabinet or in accordion files.

Tip two:
Now you need to put the system to use. Many people will create the system and then not use it until it is April and taxes are due in two weeks. By immediately filing your paperwork in the appropriate spot on a daily or weekly basis you will not have to do it at the last minute, thus making tax time a bit less stressful.

Tip three:
Sort your receipts. By keeping your receipts sorted you will find it is easier to find the correct supporting documentation you need if there are questions on your taxes. Besides this is why you created individual files in the first place so that each group is in its own folder making it easier to sort and easier to find what you need.

Tip four:
To help keep track of miles you will need to get a notebook and a pen to keep in the car at all times. If you get in the car to drive for business purposes you will need to write this down in your notebook. Be sure to record the date, the mileage when you left and the mileage when you returned, as well as the total miles driven. Also be sure to include what the purpose of the trip was. At the end of each month you can then input this information into your computer on a spreadsheet or similar software, but do not get rid of the papers from the original notebooks. When the notebook is full or if it is the end of the tax year you should file the notebook with your tax papers.

Tip five:
If you want to use your computer or any other electronics you have as a business expense you will need to keep a log of all activity. The IRS requires stricter reporting when it comes to using computers, video cameras, etc for business expenses because so many of them are also used for pleasure. To do this you should keep a notebook of some sort right next to your computer to record the day and time spent using the computer for business purposes, you should do this everyday. Then make sure that you file the records with your tax papers at the end of each work week or as the paper fills up.

Tip six:
If you plan on deducting a home office expense and the computer expense you should record in your tax records the exact location of the home office, how many square feet it is, the square footage of your home and where the computer is located in the home office. You should also make a copy of this form and put it in your upcoming tax folders for each year you wish to take the deduction.

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