Best Results Organizing

The other day, I asked a potential client how well she thought her family was doing on keeping up with tax paperwork. She mentioned that they have a “tax drawer” where they collect everything related to taxes. Perhaps she thought I’d be judgmental, but I think she and her family are head and shoulders above where most American taxpayers are at this point in the year.

If tax time has given you a headache in the past, Paper Doll has some suggestions for obtaining, sorting and maintaining the forms and supporting material you (or your accountant) will need by April 15th.

The basics of getting ready for tax time aren’t that scary. Five simple steps should get you on your way.

1) Create a folder called Tax Prep 2013. Yes, 2013. In any given year, you’re preparing tax returns for the prior fiscal year.

While you’re at it, you may as well create your folder for Tax Prep 2014, so you’ll have it handy throughout the coming year. For many of my residential organizing clients, we create a hanging folder for tax prep with a variety of tabbed folders for the subset of paperwork that comes into the home throughout the year: Charity (donation receipts), Medical Expenses (sometimes divided into separate folders for prescriptions and doctor visits), Educational Expenses and more. However, if you’ve made it to 2014 without a system for tackling 2013’s receipts, one nicely labeled folder is a great start.

Although Paper Doll prefers tabbed folders because they store easily with the rest of your family filing system, you might like to consider something like the Smead Tax Organizer to corral your documents.

The faster you locate the essential documents, the sooner you can complete your return and earn one of two prizes, either a tax refund or more time to figure out how to come up with the funds to pay your taxes. 

2) Watch your mailbox. Most financial institutions still send tax forms through the mail. If you’re not in the habit of opening your mail as soon as it arrives, January is the perfect time to start a new, good habit. Financial institutions have a nasty habit of hiding 1099s (of which, more next time) at the bottom of long annual statements or as enclosures with fourth quarter statements — so again, read your mail.

3) Watch your email inbox. No, you probably won’t receive tax documents via email, as it’s not secure. Financial institutions make a lot of security-related mistakes, but that’s not generally one of them. However, you will likely receive email notifications that you can log in to your online accounts at banks, brokerage houses, etc., to download and/or print your tax forms.

Caveat: this is also the time of year when phishers are trying to get their hands on your Social Security number and other vital information. Do not click on links embedded in emails to get to your online financial accounts. Type the URLs yourself, and make sure that https:// appears in the URL box so you know you’re gaining secure access.

4) Review your prior year’s tax return and supporting materials. (Hopefully, you’ve got them collated in a folder somewhere.) Make a quick list of all the forms and documents you used when preparing a previous year’s taxes. When January’s over, compare the list with what you have in your folder to see what forms might be missing or what recurring donations you might have made but forgotten. This year may not be identical to last year — you may have given to different charities, sold stock or closed an old savings account. But knowing which documents you received previously will help you eyeball the situation and recall changing circumstances.

5) Let the Taxman help. There are a few reasons you might be missing your old tax paperwork. Maybe you prepared your taxes online and had only a few forms and just tossed them in a drawer. Perhaps your paperwork is still in storage because you moved during the year. Or it’s possible that organizing your paperwork hasn’t been your major priority. Happily, getting your old tax returns has never been easier.

In the olden days (that is, before last week), if you wanted copies of your taxes, you had to either trundle down to your local Internal Revenue Service office, fill out forms, and wait in line, or you had to submit forms by mail and wait about ten business days for your forms to arrive by mail. Paper Doll suspects you neither want to cool your heels at the IRS office or have your tax documents slowly wing their way to you. (Oddly, we tend to worry less about mailing our financial information to the IRS than having them send it back to us.)

The good news is that effective immediately, the IRS has created Get Transcript, a real-time online tax transcript request service. (“Transcript” is the fancy term the IRS uses to refer to digital of old tax returns.) For what it’s worth, Get Transcript isn’t merely useful for preparing your taxes. When you apply for mortgages, small business loans, and student loans, presenting an IRS transcript is usually a quick shortcut for helping you validate your income and tax filing status.

Create a Get Transcript account with your name and email address. You’ll be emailed a confirmation code; once you enter it into the system (which you need to do within thirty minutes of receipt, so don’t dawdle), you’ll provide a variety of identity verification information and then set up a secure profile. Expect this part to take 5-10 minutes — but you’ll only have to do this once.

Get Transcript allows you to get your actual tax transcript (a copy of your original return) or an account transcript (which shows amendments or changes made by you, your tax preparer or the IRS). If you want a document that shows a combination of your original return and supporting information as well as the revisions, you must request a record of account transcript.

Select the type of transcript, year, and the reason you’re requesting it (e.g., mortgage, student loan, immigration, housing assistance, etc.). Your transcript will display on the screen. Save it as a PDF so that you can maintain a digital record on your computer or in the cloud. Don’t forget to sign out of your IRS account when you’re done.

Next time, we’ll review all of those official letters-and-numbers forms that can make tax preparation so stressful, and we’ll follow up with the supporting materials that you may need to collect on your own.

Taking just fifteen minutes to organize today will help make tax time much less stressful. Why not get started now? Dig through your “tax drawer,” climb into your mailbox, and start gathering the essentials.