Income taxes are government-mandated fees for all individuals and businesses (small or large) that are deducted in their income annually. The procedure varies for each country but the purpose is universally the same. It is to fund the local government for the betterment of its citizens and economy. Since this is a necessary, yearly process, it is important that all your relevant files are completely organized for income taxes. This way, you will not waste your time and effort in cramming by frantically organizing your files before the IRS gets you. Read on to learn more about how to set this whole thing up.
1. Prepare all materials that you will need to successfully assemble and arrange all your files as organized as possible. Depending on the number of your documentations and receipts in finances, you need to purchase a lot of manila envelopes, folders, labelers such as marking pens, highlighters, etc., and a sufficient filing cabinet space to stack and keep them all up.
2. Once you have all the necessary materials, you need to consolidate all the files and documents that you will need for your income taxes. Categorize each of them in the following categories:
- Income: receipts, check stubs, bank stubs, all received payments and sent invoices
- Bank statements
- Credit card statements
- House bills (mortgage)
- Utility bills
- Insurance expenses
- Medical Expenses
- Advertising fees
- Resale fees
- Labor insurance expenses
- Office expenses
- Other (Miscellaneous)
These are the basic things that you need to consolidate and classify your data. Just include every financial document that you can find. Use your envelopes, folders and most importantly, your labelers so that you will not be confused.
3. Accurately put all files in their respective categories. You do not need to be really neat and tidy when doing this. Being able to put the files into the correct place should be your main concern. When everything is categorized, arrange all of them by date. Make sure you put markers on it per quarter and year. All documents in the previous years should be consolidated and kept in a box together with their W-2 form and 1099 information. Label the box accordingly and put it in the filing cabinet. Focus on the current year. Always set a new filing system for every new year to come.
4. Make sure that everything is labeled and arranged by date chronologically. This way, when the time comes that you need to compute for your income taxes, all figures will be easier to find and cross-referencing will be a walk in the park.
Being consistently organized is a requirement for all individuals who wish to save a lot of money, time and hassle from a last minute search of the much- needed files for the income taxes. This can also help you keep track of all your finances hence, making it easier and faster to manage it. As long as you follow these effective steps, you will soon be the most efficient, time-saver and stress relieved person that you will ever be. This will leave you plenty of time to have fun! Good luck.