It happens to thousands of people each and every year, the horror of doing their income tax. But with a few easy income tax tips you can start off each new tax year with confidence and be ready to claim as many deductions as possible.
One of the simplest income tax tips is the ability to arrange and document as many deductions that you can so that you can maximize the benefits at the end of the year. Too many times people miss out on possible deductions because they misplace receipts or are confused as to what slip of paper is applicable to what. Or they dump a shoebox full of receipts on their accountant’s desk and are unable to remember what was applicable to what and can’t make heads or tails out of the mess.
The best way to start off is at your local supermarket or stationary store with the purchase of file folders, small envelopes and a secure file holder. This can range from a simple accordion file holder to a filing cabinet depending on how complicated your tax receipts can be. Don’t forget that in some cases these purchases themselves can be deducted!
Next, set up one area of your home or office specifically for the storage and organization of your tax receipts. This can be as simple as a bulletin board in one corner of your kitchen to a desk drawer to an entire desk, but it has to be dedicated to holding your tax receipts in a secure location. There’s nothing worse than discovering that your well-organized folder of vital receipts have been tossed out in the trash because they were sitting too close to the garbage bin. Even a clearly marked shoebox can be mistaken for a pile of garbage paper under certain circumstances, so prepare for the worst by setting aside a specific area for your receipts.
Sit down and designate a separate folder or envelope for each and every month of the year, starting with the month directly following the filing of your tax return. Take the smaller envelopes and write on them exactly what sort of tax receipts you plan to put in each one. For example, a salesman may want to assign such names as Dining Expenses or Gasoline Receipts while a freelance writer would use such topics as Mailing Expenses or Reference Materials Receipts. And don’t forget your Charitable Donations! With each envelope clearly labelled as to what’s going inside you’ll have less chance of getting confused and placing the receipt in the wrong envelope.
Place one of these labelled envelopes into each month’s folder or space and then use them to sort out your receipts at least once a week, if not immediately after receiving them. Too often many people find themselves with a fistful of tax receipts or possible deductions without any idea of what they were originally for or the circumstances surrounding the event. Even scribbling a short note on the back of the tax receipt at the time is better than nothing. And it’ll serve you much better than to take a shoebox of mangled paper to your accountant each year and then rack your memory to try and remember what was connected to what.
But wait, you ask – why separate them by months when you just need one final total in each category by the end of the fiscal year? Well, here’s another income tax tip! There’s nothing worse than sitting down and trying to prepare for your income tax than facing a huge unwieldy stack of paper receipts, even if they’re all in the same category. Each month sit down and add up the individual envelopes so you have a running total available. This means that at the end of the year instead of having a plethora of paper to add up you have only twelve totals and you have the total in that category quickly and easily. This income tax tip will lessen the pressure on you and your calculator immensely as you start doing your paperwork. Tax time is stressful enough; why strain your eyes more than you need to squinting at lightly-inked paper receipts or hand-written pencil scribbles that made sense at the time but are now unreadable.
One of the biggest errors most people make is to underestimate the number of possible tax deductions they may be able to claim and thus fail to keep tax receipts on hand. By making a routine of filing any and all tax receipts as soon as possible you make it easier at the end of the tax year to find out what’s eligible and what’s not. Even if you end up discarding the envelope containing the tax receipts at your accountant’s office it’s better than discovering too late that you were able to claim certain deductions and now have no recourse. This income tax tip is a good way to not only lessen the stress and tension that many people experience at tax time but also allow you to get the biggest refund that you can or at least claim the maximum amount of deductions.
One of the fastest and easiest income tax tips is to organize and prepare your receipts so that you can approach tax time without fear. By following some of the tax tips above you can make the best of tax season and leave your accountant’s office with a smile instead of a tension headache!