Few things are certain in life, but filing taxes is one of them. Every spring, Uncle Sam (aka the U.S. Internal Revenue Service or IRS) comes knocking at the door, beleaguering hard-working tax payers with the task of gathering and organizing a year's worth of financial records. For some, this frustrating process takes many hours or even days — time that no doubt could have been better spent elsewhere.
But preparing to file taxes doesn't have to be a last minute, stress-induced race to the finish line. Technology is on our side when it comes to getting organized and keeping track of all the details that can make tax preparation a pain. With a little bit of strategy and some minor ongoing effort, you can set yourself up for a stress-free filing process.
Instead of dreading April 15th, consider these four tips to streamline your tax preparation process for next year:
1. Get Organized
Organization is a vital part of tax preparation. You have a choice: get organized now or feel rushed to do so later. Create a multi-pocketed folder in which you can store receipts, IRS forms, tax payment records, and other important documents as you receive them throughout the year. You'll be glad you did when tax season comes around and you've got everything filed in one place.
Better yet, go digital with organizational apps that make tax preparation much less stressful. Kelli Grant, a personal finance reporter for CNBC, recommends MileBug for documenting business mileage, as well as Slice Shopping — an app that monitors your email inbox for deductible tax receipts throughout the year.
2. Scan Your Receipts
Fortunately, the days of handing your tax preparer a shoebox of receipts are no more. Receipt scanners that come in compact desktop and USB-powered models allow you to document your expenses on-the-go. Some even offer compatible apps and cloud service, so your itemized receipts are automatically backed up and protected against a hard drive crash. With an app like Genius Scan, you can even scan receipts directly into your smartphone or tablet by taking a picture to place in an online folder for tax purposes.
If you do not currently keep your receipts, I recommend doing so to maximize your itemized deductions. Itemizing deductions is an effective way of lowering your tax bill to the IRS. The IRS recommends itemizing your deductions if the sum of those deductions exceeds the value of your household's standard deduction.
3. Avoid Using Cash
When it comes to the IRS and taxes, the longer the paper trail, the better. The cash you spend is difficult to track and reconcile with your receipts. Attorney and CPA Mark Kohler recommends using a debit card or credit card for all personal and business deductible expenses. A credit card statement is no substitute for a receipt, but it is easier to reconcile against your records than a cash withdrawal from your bank account.
Online banking makes it easy to access your expense records any time, anywhere, and eliminates the need to file paper statements away for future reference. Major banks all offer some form of online banking, so if you haven't already, log in and familiarize yourself with your bank's online interface. When the time comes to collect the relevant information, you'll have it all in one place and be ready to go.
4. Keep Track of Your Charitable Giving
As I explored in a recent blog post, charitable giving not only benefits our communities, but has benefits come tax time as well. I hope you give generously throughout the year. My next blog will address all the ways to prepare, track, and itemize donations so your generosity is rewarded when you file.
With an assist from technology, tax preparation is becoming less of a hassle than ever before. If a last-minute tax nightmare is something you've vowed never to repeat, take advantage of these resources and make this year's tax season the easiest ever.
I'd love to hear your strategies for keeping tax season hassle-free! Tweet us @Lindsey2Wealth to share your tips!