Tips for Organizing Office & Personal Paperwork for Tax Time

I have been working with a client to get all of her financial paperwork organized in her NYC home office so that it can be handed off to her accountant.  We are making good progress and should be able to hand off the first round of information early next week.  This is the first tax season that I have worked with her and I am learning her current system.  Once the work has been done and all information handed off to her accountant, I will review the process with her and suggest paper filing tips to make it more efficient.

After some experimentation, my client has opted for a manual system for keeping track of all relevant data.  Regardless of whether you use an entirely manual system for paperwork filing and organizing, go completely paperless or use a combination of both, you may still need some help organizing your office and personal paperwork in preparation for your tax filing.

Here are some paper filing tips for getting organized in preparation for tax time:

1. Collect receipts in plastic envelopes instead of boxes and sort/file them at the end of each month.
2. File paperwork in chronological order at regularly scheduled intervals either on a weekly or monthly basis.
3. Include a notation identifying the reason for the expenditure on each receipt prior to depositing it in the plastic envelopes.
4. Clearly note that date a bill was paid, the check number and confirmation number (if you are paying online) on your receipt.
5. Highlight tax related expenditures on credit card statements.
6. If you receive electronic credit card or bank statements and will need copies at the end of the year, print them out at the end of each month and file them.  This will take less time than having to print them all out at one time.
7. Reduce the amount of physical space needed to store financial paperwork by scanning receipts, filing them on your computer and discarding the originals.  (The IRS will accept scanned copies.)
8. Use accordion folders or clearly labeled folders in your file cabinet for storing all tax related documentation.
9. Review retention guidelines with your tax preparer and apply them to your files.
10. Designate an area for storing the required number of prior year’s tax filing information that is accessible but not in your prime working or living area.
11. Maintain a list of questions that will need to be addressed at tax prep time and keep it with your tax paperwork.
12. Set up a system now for collecting the paperwork that will be needed for filing 2011 taxes.

If you have yet to start organizing your paperwork, it is definitely time to get moving as there are 2.5 weeks until the filing deadline.  By waiting until the last minute, you will run the risk of making mistakes that could land up costing you some money.  In addition, you will be putting a lot of unnecessary stress on yourself.

Keep in mind if you invest a little time each month to implement these paper filing tips in your office and organize your personal financial paperwork, it won’t take long to get your tax paperwork in order at the end of the year.  You can then devote the time that you would have spent on your prepping your tax information doing something you really like and want to do!