Organizing Paperwork For Your Taxes

Please don’t throw rotten eggs at me for mentioning taxes, especially for mentioning them now. I mean, we have a couple of months before we need to think about it right? Sorry, but I am one of those sickening people who has her taxes done and in the mail by the first or second week of February. So please forgive me. : ) (Note from Tawra: She has a short tax form to fill out so don’t feel too bad if yours aren’t completely done yet. 🙂 )

You may not realize it, but you can save money by having your taxes done early if you are getting a refund. The earlier you get your taxes done, the sooner you will get your money back. Then you can apply it to your credit card debt, your house mortgage, other debt or savings. You can save two, three or even more months interest on things if you can pay them down sooner. Every minute you procrastinate means you are losing money.

If you are in debt up to your eyeballs or are unemployed, don’t even consider using that money for a vacation, big screen TV or putting a swimming pool in your yard. Give yourself a good shake, take control of your finances and stop allowing your finances to control you. Get some backbone. Here are a few ideas I thought might help you “normal” people who sometimes (always??) wait until April 15 at midnight to mail your returns.

Half the battle is trying to find the paperwork you will need. Once a year I go through my papers, desk, file cabinets and anywhere I might have documents relevant to taxes. I usually do it in January so I can start fresh for the year. If you can get that done ahead of time the rest of the process will go much easier.

Here’s where to start:

Start with your desk and the piles of papers you have laying around it and on it.
Next, work your way to your file cabinet.

Use the following things to help you get through organizing your taxes and paperwork:

Move Quickly – You don’t have to thoroughly read each and every paper. At a quick glance you should be able to place it in the pile or box it belongs in. Now is not the time to study and think about each item. After you get them in their piles, which I have listed below, you can then take each separate pile and deal with it in more detail.
Place everything in one of four piles. – Everything can usually go in one of these four piles. If you have mounds of papers making a big mess, you may want to put them in boxes instead of a pile.

Here are the four piles you should use when getting tax documents together:

Trash – if you need to shred things, place in a bin or bag to shred at a later time. Now is not the time to shred one paper at a time.
File – these are things you don’t need to do anything with but you do need to keep and file. Place them in a box to set by the file cabinet and file later. If you have a lot of filing you may want to set aside one whole day for this because, before you file the new items, you will want to go through each file folder and toss what you no longer need in it.
Bills – Put these in a separate pile to go through and take care of as soon as you are done sorting.
Correspondence – Correspondence includes the things you need to make phone calls about or deal with in some way. Take care of these by placing them in the order of importance or by date which they need to be done. These should be dealt with after you have dealt with the bills.

Papers and laundry are two things that easily get out of control in people’s lives. The secret to keeping it under control is to stay on top of it and to follow through with it. In the same way you shouldn’t leave laundry laying around in piles after it is dried, you shouldn’t leave paperwork laying around after you first look at it.

While you still have your mail in your hand, place it in the trash, in the “to file” pile, the bills or in the correspondence pile.

Keep a trash can by your desk along with three trays, file folders or even separate piles on your desk or counter. Use one tray for things to file, one for bills and one for correspondence. If you can’t figure out what pile something should go in, add a miscellaneous file or tray too. As far as tax papers go, these start in your file pile and then are placed in your file box or cabinet in a special tax folder.

Be ruthless. We usually keep way more papers than we need. For example, unless you have your own business at home, you really don’t need to keep five years worth of utility bills. I keep three months worth just in case I need to show I have lived in my home for a certain amount of time. Each person is different but if you have a question call your accountant or the IRS now (Don’t wait until April 10 because they’ll be so busy, you won’t get through to them) and find out exactly what you need to keep. I have also called one or two credit card companies to see if I need to keep their statements for any reason and in normal circumstances, you don’t. Everyone is different, though, so take just a couple of minutes and make the call. It will save you time and work later.

Read some of the other articles on our website for more information on organizing your paperwork if you need more tips but these basic guidelines should help you get started.

-Jill

Note from Tawra: Some states are now having money problems and not sending back tax refunds you should get for many months or longer. I strongly suggest that you start making sure you are only taking out what you think you will need to pay and NOT using it as a savings account as a lot of people do. You never know when there will be big crisis in the government and you don’t get the refund back at all.