I am one of those people who has to balance the checkbook to the penny – it’s how my dad taught me, and I go a little batty when the numbers don’t match exactly. It’s mostly a fear thing, fear that somehow the whole checkbook balance will be off, I won’t know exactly how much is in there, and I’ll end up with a ton of service charges. It’s not exactly logical, but it’s how I feel.
I feel pretty much the same way about taxes. If I don’t get it exactly right, something horrible is going to happen, like the meanest IRS agent is going to show up at my door and tell me I’m under arrest for tax evasion. I know there’s no logic to how I feel, but nevertheless I feel that way, and my feelings make tax time overwhelming. I get stressed out just thinking about what I need to do, all the data I need to gather, and fear that I might have missed something.
In order to make things more manageable, I do a few things that might help you as well:
1. Keep a pocket folder dedicated to taxes. This is the single most important thing that I do – I use a multi-pocket file folder like this one and file documents as they come in according to category. I have sections for paystubs, charitable contributions, medical and childcare expenses, business-related income and expenses, tax documents like W-2′s and 1099′s, and a miscellaneous pocket that’s a catchall for anything that doesn’t fit in the other pockets. The wonderful thing about this system is that you can customize it to fit your needs, and do some tax prep throughout the year.
2. Use online tools. I love online banking, and I use my computer to save copies of important downloadable documents, and to capture screenshots of documents that can’t be saved as a pdf. I have a folder on my computer that’s labeled taxes and all tax-related documents go there. It’s especially useful at the end of the year when companies make year-end statements available online.
3. Hire a professional. I took a personal income tax law class in law school, and I actually kind of enjoyed doing my own taxes. But a few years ago, our taxes started getting more complicated than I was comfortable with, so we hired an accountant to do our taxes for us. I don’t think that we save any money in the form of credits and deductions I wouldn’t have known about, but it’s worth every penny for the peace of mind. If you’re comfortable doing your own taxes, then consider using a program that walks you through the possible deductions and credits – it might find something you would have overlooked on your own (and do most of the math for you).
4. Be organized. Our accountant needs me to provide the information necessary to complete our taxes, so it’s still up to me to pull all of that data together. And the more comprehensive and organized I am, the easier it is for him to do his job (and I assume that he consequently charges us less, though I’ve never actually asked). In the past I have tried to get that information together by mid-February, but I am running a couple of weeks behind this year. I will definitely be done by the end of the week, however. If you’re doing your own taxes, then gather all of the information you know you’ll need as early as possible, and don’t procrastinate – it’s not worth the stress.
5. Do a little at a time. Most tax-related tasks can be broken down into smaller projects. You can gather all of your charity donation receipts at one time, but pull together your childcare expense information at a separate time. You can even break up filling out your 1040 by the section of the form – calculate your income one day, then work on the above-the-line deductions the next. Before you know it, you’ll be done!