Remember back to last spring when you were preparing your taxes. Pretty annoying, right? Didn’t you hate digging through all your papers to find relevant information, some of which was already more than a year old? I bet you made a vow back then that you were going to be more proactive in the future.
January is a great time to get things set up for a smooth tax process. As I described in Reducing the Pain of Tax Time, setting up some Excel spreadsheets now will make your life so much easier when you starting working on your 2016 taxes. Each time you execute a transaction that is going to be included somewhere on your tax return, enter it in the spreadsheet. It’s a no-brainer to keep track of that information throughout the year, rather than having to dig it up after the year has ended.
Here are some items that you can be tracking:
- Charitable donations
- Medical and dental expenses
- Home office expenses (electric, cable, phone)
- Non-reimbursed business expenses
- Education expenses
- Cash income
The great thing about Excel is that it easily computes totals. So when tax time comes next year, you’ll have your totals all ready!
You’ll still need to hold on to any proof of expense (receipts or bills) so create a Taxes folder — or multiple folders — to put those in. Get into the habit of entering the data into the appropriate spreadsheet prior to filing away the paper. For expenses that come to your attention electronically, develop the habit of opening the spreadsheet and recording the data as soon as you get the proof of expense, whether it comes to you via e-mail or on-line.
I guarantee that this method will simplify your life at tax time! So what are you waiting for? Go set up some spreadsheets!