This guest post is Part 2 in a 3-part series discussing taxes written by Christopher Remus, author of Tax Pain Relief.
In Part 1, I talked about the different sources of tax season pain such as stress, tension, and anxiety. This pain is compounded by our attempt to avoid the pain by procrastinating, which only serves to add more pain to the process of getting our taxes filed.
The good news is, it’s possible to break the tax pain cycle using the system outlined below. How do you get started? Simply follow these five manageable steps outlined below.
1. Start Early
The longer you wait to do your taxes, the longer the tax pain has to build. Starting early on your taxes prevents the tax pain from building to increasingly uncomfortable levels; the trick is actually doing it.
To Do: Use a tool like Evernote to create a single and well-organized digital storage location for all of your tax documents.
2. Divide the Process Into Small, Manageable Pieces
Instead of trying to collect your tax information all at once, create a system that helps you stay on top of your paperwork one step at a time. By implementing the Tax Pain Relief system and adding your relevant tax information to it throughout the year, most of the information you need to file will already be waiting for you in your centralized digital repository once filing season rolls around
To Do: Create a central repository that lets you deposit relevant information (taxes, receipts, etc) as soon as you get it. This will help prevent a last-minute scramble in April that will ultimately increase your stress and anxiety to another level.
3. Maintain an Organized System
The single digital storage location you set up is a self-organizing system for keeping track of your tax records throughout the year. If you are a business owner, I recommend separating your personal tax records from business tax records.
To Do: If you have multiple businesses, keep the tax records for each of your businesses separated as well. Setting-up individual notebooks in Evernote works very well for this purpose. In addition, use Expensify to generate expense reports and receipts, then add those reports and receipts to your centralized repository (take a look at Natalie’s post here for some additional advice on keeping things simple by only collecting the receipts you need and ditching those you don’t). A system like FileThis allows you to do the same with financial statements.
4. Keep Good Records
Small business expert Denise O’Berry emphasizes that keeping good records is essential. She says, “Right along with being prepared is keeping good records. Keeping your records organized and exact on a daily basis helps keep you from stressing over the deductions you have been missing.”
To Do: Use the Evernote mobile app to easily create photo notes documenting your charitable donations, e.g. clothing, throughout the year. Additionally, integrating Expensify and FileThis into your system makes it easy to find and access your tax filings, such as receipts and financial statements, all in one place.
5. Prepare All Necessary Tax Documents
One of the most important aspects of taking the pain out of tax filing is making sure you have collected all the documents you need to complete the required tax forms. Knowing that you haven’t overlooked a key piece of information gives you the confidence that you’re much less likely to make costly mistakes when it comes to completing your tax returns. There are a number of lists available to help you understand what documents you need to file your taxes.
To Do: Add a checklist to an Evernote note and review the information you’ve collected in your tax notebook(s) through the year. Speaking from personal experience, this approach is a lot easier than trying to collect all the information at once and check-off your list of required documents at the same time.
Breaking the Tax Pain Cycle
Congratulations! By reading this post, you’re already on the road toward breaking the tax pain cycle! The next step in experiencing tax pain relief this year and for years to come is to setup the system for yourself. Remember, the system can’t work for you if you don’t put it in place and use it throughout the year.
The simplicity of this system was the key in helping me overcoming my strong tendencies to procrastinate doing my taxes, which caused me unnecessary pain tax season after tax season, year after year. I hope it will do the same for you. Keep an eye out for Part 3 of the series, where I’ll discuss how to use your Tax Pain Relief at tax time. Be sure not to miss it, because this is where you’ll experience the real power of the system!
About the Author:
Chris understands the stress and pain that comes with collecting various tax forms, bank statements, and receipts. To combat this issue, he developed Tax Pain Relief to make the tax information collection process a lot easier and better for himself. It works so well that he has since decided to share the process with others to help them get their tax lives organized, once and for all!