Avoiding Tax Pain Next Year

You are done with your taxes for the 2010 year. So, was that fun? Probably not. Well, you should use this year as a lesson to avoid tax pain next year. 

Let me metaphorically stand up and admit something. I am a procrastinator just like you. If it can be done tomorrow, I’ll do it in a few days! This approach to life has cost me more than a few times. It also made my life living hell every year when tax time came around. I, just like you, waited to the last minute and then went insane trying to get my taxes done. 

The good news is it doesn’t have to be this way. If a big procrastinator like myself can get his act together, then so can you. The key is to set up a simple system of organization and stick to it each year. There are two ways I do this that you might consider although, of course, you can use your own madness to come up with something unique to you. 

I have various investments [buy high, sell low, groan], bank accounts and basic items that most of us all have. They each send me random reports every so often that I don’t look at until tax season when I need them. By then, of course, one or two of the critical documents have teamed up with a few random socks to make a run for it and I am left in a panic. Not only can I not do my taxes on time, but one of my feet are freezing. 

To avoid this, I’ve hit upon a simple system. Buy a large packing envelope at the local office supply store. Mark the year on it and stick it next to wherever you keep your bills. As bank statements, 1099s and the like come in, just dump them in the envelope. By the end of the year, you have a nice plump envelope that contains everything you need for your tax return. It’s inelegant, but works for me. 

The second step is to get an online accounting system. I use Quickbooks online for a few of my small businesses. I believe its $9 a month. I’ve forced myself to get into the habit of entering things as they come in. To stay on top of it, I just set aside 30 minutes on Tuesday to do it. When tax time rolls around, my CPA logs on to the system and pretty much has everything he needs for the business returns. 

These two steps may sound very basic. Well, they are. By taking them, however, I’ve reduced the pain of tax time massively. Now if I could just figure out how to avoid paying the government. Hmm…