Surviving tax time: how do you organize?
April 10, 2015
Every single year, no matter how organized I think I was the previous year, I wasn’t. Then I’m having to dig for hours to find and sort all the necessary documentation for my tax filing. This year’s even more complicated than last because we have rental property in the mix, so I was determined not to repeat a decade of errors.
This year, finally, FINALLY, it seems like I might have developed a good system.
Throughout the year:
I keep a running spreadsheet of rental property income and expenses which will be matched against the property management company’s 1099.
I keep another running spreadsheet of all deductible expenses as they’re incurred: mileage, non-reimbursed business expenses, donations.
At tax time:
I save all files with category information. For example, a 1099 from Ally Bank would be named: Income 1099-M Ally Bank.pdf. A donation receipt is saved as: Deduction Donation Goodwill 01-09-15.pdf.
Sorted by name, all my income and deduction forms will naturally group together, and I can easily combine them into a single PDF if necessary.
One spreadsheet to organize them all!
I match all the forms and receipts against my running spreadsheet and then pull that information into a Summary Spreadsheet for the tax year. I also compare this to the previous year’s Summary to confirm everything’s there, or if I forgot to download Bank of HadAGoodBonus’s 1099-INT form. Our banking changes year to year but not a ton so this is a good way to double check.
Any relevant notes about life changes and people-related information are included in that spreadsheet: names of people filing and our dependents, any changes from the previous year, etc.
Since I recently started using an accountant for all the legwork, my concession to the value of my time, it’s been even more imperative to make sure all the information is there and easy to understand. I generally catch a minor mistake or two when I review any prepared taxes, mine or otherwise, so my very detail-obsessed brain knows that I shouldn’t be handing over a virtual shoebox of receipts if I don’t want a horked up return filed.
Alas, it’s to be another extension for us this year, but I have hopes that next year we’ll be filing by Jan 30th, just like the good old days!
:: Do you have an amazing organizing system? Tell me all about it!
My amazing organizing system is a manila folder. I drop everything in there throughout the year so when it’s tax time I just grab and go. Our tax situation is pretty simply. But as we start to invest and get into real estate, we’ll need to step up the ante.
I rather miss those days, I too was once a Manila Folder Filer!
Our organization system consists of throwing all potentially relevant paper documents on top of the filing cabinet and putting all potentially relevant email documents in various folders in hotmail (really we should have just the one, but we don’t… sometimes it goes in the purchases folder, sometimes long-term, etc.). Then in feb or march we spend a day sorting and printing everything.
I’m impressed that it only takes you a day. Maybe my real problem is that I’m inefficient when I tackle the paperwork.
My rental income statements are electronic now so I download them to a folder (I really download them to keep track of the repairs done). I don’t reconcile them to the end of the year statement.
If I donate online, I’d save that email to a donation folder.
My 1099 are electronic so I just move the emails to a tax folder in my email.
When I had deductible expenses (tools) I keep the receipts in an envelope. No scanning them. Too much work and if I need the warranty (that’s not lifetime) I need the receipt.
Have you ever had to use the receipts for the repairs to prove expenses? I assumed that the rental statement alone wouldn’t suffice in case of an audit.
I think you are right that you would need more than just the statement. I don’t know if scans would work (as I’m too lazy for that so I haven’t had to find out).
My company sends the receipts at the end of the year and a debit/credit statement (wasn’t sure if you meant 1099 for ‘statement’ or a summary).
(I downloaded them so I could easily see that yes, my garage door has been fixed a couple of times or the plumber etc. )
ohhhhh….nooooo… My organizing system has two aspects: a) Quickbooks Online and b) a tax accountant who also will do bookkeeping for a ridiculously reasonable fee. You can give your accountant limited access to QB, which is all that’s needed for the person to ride herd on your day-to-day financial shenanigans.
Come the beginning of the new year, just about everything is together. All we have to do is send out 1099s to my subcontractors and collect incoming paper for me. QB seems to interface with her (expensive) professional tax program and puts everything together with a minimum of hassle for either of us. The ones she complains about are the crazy ones and the ones who show up with shoeboxes full of receipts.
I keep receipts for the business and for personal charges in manila envelopes, each containing 12 regular letter-sized envelopes, one for each month of the year. That’s probably overkill — I’m sure we could track down anything that was required if they were all tossed into a single giant envelope per year. File folders hold incoming hard-copy paper; QB keeps track of billing, received payments, and amounts paid to the underlings. Et voila. It all gets stored in a file cabinet in the garage.