How to Tackle Next Year’s Taxes, Today

Just when you thought, “So glad that’s over with…”, I'm here to encourage you to start prepping for next year's tax season. Which, no doubt, has more than a few of you scratching your heads wondering…

1. Why do I need to start worrying about taxes right now?! I JUST survived this year’s tax season!
2. Aren’t you supposed to be organizing closets or something? What does home org have to do with tax prep, anyway?

Let’s address that last question first.

While I’ve definitely spent more than my fair share of time in garages, pantries, and, yes, closets—home organizing isn’t just about finding clever ways to store a winter wardrobe or your partner’s sports memorabilia. It’s also about helping clients stay on top of their digital and physical paperwork. I’m talking receipts, tax forms, bills, budgeting spreadsheets, etc. And this is even MORE important if, say, your home doubles as your business space. Either way, home organization is about helping clients streamline their daily routines which includes helping simplify the often daunting task of tax preparation.

So, why think about taxes now? April 15 is just now becoming a distant memory and few of us want to start planning for next year this far in advance. I get it. But, hear me out. A little foresight and planning can actually save you a ton of time and stress come next April. Here’s how…

Embrace digital solutions

Maximize your financial tools

Make use of whatever financial management tools you have at your disposal. This could be as simple as a spreadsheet or as comprehensive as dedicated financial software (think QuickBooks, FreshBooks, or Xero). Regardless of what you use, the goal is to make tracking your financial activities as easy as possible.

Digitize your receipts

Instead of keeping physical receipts, consider emailing them to yourself or using a digital folder or tag in your email system like “Taxes20245” for easy retrieval.

Consider using apps for your receipts

If you frequently deal with an above average amount of paper receipts, you can take digitizing one step further and use apps like Evernote, Notes on iOS, or Files by Google for Android to scan and/or categorize them efficiently.

Streamline record-keeping

Online banking notes

Take advantage of the notes section in your preferred online banking platform to annotate any transactions that might be tax-deductible or related to business expenses.

Maintain a regular update cadence

Create a simple spreadsheet to track your expenses and update it regularly—be it weekly, monthly, or quarterly. Incorporate this task into your routine, perhaps when you sit down to pay bills, to ensure your financial records are always current.

Stick with a traditional file system

Organize with physical files

If the thought of digital files gives you hives and you prefer to use a more concrete method, set up a file folder system for the current year. As you receive documents, receipts, and records, place them in this file.

Proactive documentation

Keep a copy of the tax preparation sheet from your accountant in your file. Use it to note down relevant financial events and expenses as they occur throughout the year, which prevents the last-minute scramble to gather tax information.

Make your physical files portable

Some of us live in parts of the country where floods, fires, earthquakes, and tornadoes are, unfortunately, a thing. If that’s you and you really want to maintain physical files, try migrating to a portable file system. That way, if you need to make a quick getaway for whatever reason, you can do so without leaving important documents behind. A quick search for “portable file systems” on Amazon led me to thousands of results at different price points. So you’re sure to find something you like there.

Pro Tip: At the end of the tax season, take time to purge outdated documents and consolidate what needs to be saved. Use a shredder for sensitive documents to protect your privacy. Of course, before you start shredding, consult with a tax professional to understand how long you need to keep specific documents, as this can vary based on legal requirements and personal circumstances.

Here’s my two cents when it comes to document retention:

• One year. Keep utility bills, cable/entertainment receipts, phone/credit card statements, and monthly financial statements.
• Three years. Retain all documentation related to claimed business expenses and medical bills.
• Seven years. Preserve all tax returns, supporting documents, and any records of audits.
• Indefinitely. Safeguard documents such as loan payoff confirmations, year-end financial statements, personal identification papers, legal records, vehicle titles, and warranties.

Remember, the key to a stress-free tax season is proactive organization. By adopting these effective strategies today, you're not just preparing for the next tax season, you're also establishing a system that will enhance your overall efficiency and peace of mind year-round. Starting early can turn the sometimes daunting annual tax scramble into a manageable, calm process. And that’s something we can ALL benefit from!

Are you ready to transform your space and mindset? Contact Sage Home Harmony today, and let us help you start your journey to a more organized, fulfilling life.