Every year during tax season, we would get urgent calls from clients who are about to go meet their accountants or who are already sitting at their accountant’s office with missing paperwork.
I’m sure this is a scenario that all of us have found ourselves in at some point, whether we work with an accountant or we file our own taxes.
I remember the first couple of times I prepared my own taxes, it took so much longer than it should have because I had to keep pausing to look for a document that I had forgotten about. What complicates the process further is that many financial institutions no longer mail tax documents, but you have to log in online to print them yourself.
If you’re tired of spending hours of prep time just so you can start preparing your taxes every year, there is an easier way with 3 simple steps!
1. Right after you’re done with your 2012 tax return, make a checklist of all of the documents and information you used to prepare your tax return. This will be a good starting point for next year. Make sure you include your W-2s, all investment accounts (and the last 4 digits of their account numbers if you have several accounts), bank accounts, charitable contribution receipts, etc.
2. Once you have a finalized checklist for next year, put it in a folder labeled 2013 tax return. If you open a new account in 2013, remember to add that account to your checklist since you may receive a tax document for the 2013 tax year. As you accumulate statements or receipts that you’ll need to prepare your taxes, put them in your folder. For example, if you make an IRA contribution or if you get a tax deduction on your state tax return for 529 contributions, print a receipt of your contribution and put it in the folder. Another example is receipts for charitable contributions and clothing donations. Starting early 2014 you should start receiving W-2s and 1099s from financial institutions. Put everything in your folder and cross the items off from the checklist. By beginning of March, if there are still documents that you’re missing, log online to your accounts and see if they’re available.
3. Finally, when you have all of your documents in your 2013 tax return folder, you are ready to meet with your accountant or sit down to prepare your taxes! I find it helpful to have a copy of last year’s tax return next to me as a guide to make sure that I don’t forget any forms or documents. Once I’m done, I review the current year’s tax return against last year’s as one final accuracy check. If my situation has not changed much, the results should be similar if I’ve done everything correctly.
Gathering documents is the hardest part of preparing tax returns. If you can be disciplined about keeping the checklist updated and filing documents as your receive them, it will make the process much easier when you’re ready to prepare your taxes.