This will be my third post this month discussing your mortgage and income taxes. Fun topics, right? My first post discussed Filing Taxes If You Bought or Refinanced a Home in 2013 and my second post explained Buying a Home During Tax Season. In the first post, I shared a little about my system for keeping my tax documents organized, but there was room for improvement there.
Thank goodness I know Erin Podbielniak of theNeatNiche! I asked her if she would talk a little on my blog today about the best way to keep tax and other important documents organized so that you are ready when it comes time to buy a house or file your taxes. Erin’s tips are below–enjoy!
Does the thought of tax season make you cringe? All those statements…varying deductions…receipts from donations…the frazzled calls from your accountant because you apparently missed one crucial piece of paper…it’s enough to make anyone want to bolt the mailbox shut and run for the hills.
The truth is we all complain about tax season because it requires us to be organized, to keep important papers straight, and to be as accurate as possible in our reporting. But even though tax season is when these requirements come to the forefront, any one of us could find ourselves in a situation where we need to put our hands on those important papers immediately. In either case, a little preparation goes a long way.
First, create a file in your file system specifically for Important Papers. (If you don’t have a file system, or if you have one that’s just not working for you, please contact theNeatNiche for help!) If you’re not sure what should go in this file, reach out to your accountant or financial professional and ask! Some examples might be your passport, social security card, a copy of your driver’s license, birth and death certificates, a list of family members and their doctors and medications, copies of legal documents such as your power of attorney and will, a home inventory list, etc. If you choose to use a safety deposit box at the bank, remember you will only have access to those materials during branch hours, so if in an emergency you’ll need access to a specific document right away, you may be better off storing it at home in a fire-proof safe. Lastly, there’s the added benefit of your homeowner’s insurance covering items in your home, whereas safety deposit boxes are rarely insured.
Second, within your Important Papers file, create a sub-folder for papers related specifically to your taxes for the current year. Into this folder will go your tax-deductible receipts and any paper you get in the mail that states “Important Tax Information Enclosed.” Year-end statements for your investments and your W2 definitely fall into this category. Depending on your financial situation, you may receive other tax-related mail as well.
By creating these specific homes for your important and tax-related papers, you’ll have little to fear when tax season rolls around again. Simply grab the tax folder from within your Important Papers file, and you’ll be ready to meet with your accountant! Once you get back your completed tax return and all those supporting documents you provided, file the whole group of papers together under a label of “Taxes – 2013.” As the years pass, you will eventually have a whole section of past taxes, which makes it easy to find desired information for a specific year, should you need it.
With these two simple steps of creating a single file for Important Papers and a sub-folder for tax-related papers, you’ll soon be your accountant’s favorite client. You may also find you have new friends in the world of financial advising and lending, too, and your friends may be clamoring for your secret to organized, financial success. We’ll let you decide if you want to share!
Organizing Specialist Erin Podbielniak of theNeatNiche strives to help her clients lead easier, less stressful, and more productive lives. It is her desire to see each of her clients embrace organization as a tool that helps them clear out the piles, let go of stress, and instead fill up their lives with what matters – faith, family, and friends.