Ask the Organizer: How do I Organize Taxes?
My tax documents are the one piece of paperwork I have always had an organized system for storing and keeping. Many of you have asked me how to organize your taxes and I don’t think you are asking me what size file cabinet I use.
The questions usually come as:
- What papers do I need to keep?
- How do I keep track of all my papers?
- What tax deductions can I take?
First, I want to make it VERY clear that I am NOT in any way an expert in taxes. I do however love paper.
So will share with you the steps I take to keep my tax write off paper work tidy.
First, our family takes a LOT of deductions.
I use a kitchen counter filing system to track receipts from: received, to entered in my system, to paid.
Medical expenses alone take up half of our take home pay.
If you spend more than 7% of your income on medical expenses, every penny OVER that 7% is a tax deduction. We write off:
- The cost of our children’s special needs school
- Doctor appointments
- Lawyers hired to fight for our children’s medical rights
- Supplements that a doctor has prescribed
- MILEAGE to ALL of those activities!
The list of allowable deductions is amazing. You can view it here:
List of other deductions:
- Mortgage tax credit
- Money lost in the stock market
- Charitable donations
Second, You have to be able to “prove” the deductions you are taking.
I think this is more to the point when people ask me “how to organize taxes”. How do you make sure you have what you would need if you were audited.
- I do know you need to keep any receipt that you write off on your taxes for 7 years. A credit card statement is not good enough. I do believe you can have a scanned copy though.
- I used to take pictures of my Goodwill donations as proof. Now I do not even write off Goodwill donations. For me, it is a very grey area.
- Keep your calendars or print out your electronic ones and put them with your files. They will substantiate any mileage deductions you take.
Home based business taxes.
I will not even pretend to give advice here, except to show you how I keep track of my deductions.
Click Here to watch a video of how I did it last year using this accordion file.
This year I have streamlined my filings because I have moved all of my schedule C businesses into ONE LLC.
I just use a basic binder with tabbed slash pockets.
I use sheets of paper to manually keep track of receipts. I try to this weekly.
For frequently used categories like postage and copies, I just write down the date and amount since I always use the same post office and copy store. Then I put the receipt in the slash pocket.
To track mileage I created a spread sheet on Excel with 31 rows. The the columns are for which deduction category the mileage applies to.
My accountant has me divide out my medical mileage between doctors, prescriptions and educational expenses.
I hope these systems help! Unfortunately it comes down to using the system!
Lisa Woodruff is a professional organizer, author and speaker. Over the past 15 years Lisa has created systems and encouraged hundreds of women as they have organized their time, home and businesses.
Lisa’s latest book, 10 Steps to Organized Paper, is a step by step tutorial to help busy women organize EVERY paper in their homes. Lisa’s unique classifications of paper into: active, reference and daily paper is revolutionizing how women manage their paper.
Lisa is a direct sale trainer. Contact Lisa to come speak to your team in person or via webinar.