Simplify Tax Preparation With a Three-Folder System
In the next few weeks, our 1099, W2 and other tax documents will be sent to our inboxes. This means that there will be a bunch of documents in April. Make it easy for yourself by organizing everything into a system of three folders.
This proposal comes through The Motley Fool, and it’s a relatively straightforward task. Lay out all tax documents in three folders:
Folder # 1: Income: Your 1099 and W2 will be placed here. These include reported income for the year, whether it be from your job, interest on a savings account, dividends, etc.
Folder # 2: Expenses and Withholdings : The Fool explains: “This is where you will store mortgage statements, investment-related expenses, medical bills, childcare expenses, and receipts for non-reimbursable / work-related gases, food and housing. “. In short, keep receipts and records of any deductions you will make when paying taxes.
Folder # 3: Investments : This is where you will keep track of all your investment reports, dividend notices, purchase receipts, and any other investment-related documents you may need in April. You can further subdivide this folder into taxable, tax-deductible / tax-deferred, and non-deductible investments.
This is a fairly simple system that will help to simplify the payment of taxes. They also offer some tax preparation tips for each category, so you’ll definitely want to check out the full post at the link below.
Organize for the IRS | Motley fool