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Unrecognizable woman holds receipts pencil uses laptop plans budget manages expenses calculates financial reports checks internet banking service poses at desktop with papers around. Organizing tax documents. View from above

Organizing Tax Documents – Cost Effective Tips

Accountants typically bill clients based on the amount of time spent preparing the return. The more time that is spent on collecting, sorting and analyzing tax documents, the more costly the process becomes. In this blog, we’ll discuss what you can do to make tax preparation easier and ultimately less costly.

1. Fill out the tax organizer you receive at the beginning of the year.

For example, update your driver’s license information. Also, provide details of quarterly estimates paid. How much did you pay? When did you pay them? Update direct deposit information. Leave us a note if you had a source of income in a prior year that you don’t have for the current year. This will answer most of our questions and make sure we accurately report income and deductions.

2. Keep track of your tax documents throughout the year so that your documents are already organized and ready for tax time.

Make organizing your tax documents more manageable by keeping up throughout the year rather than doing a last-minute scramble when everything has piled up. A quick and easy way to do this is TaxCaddy (more on this in point #5).

3. When it comes to itemized deductions, business expenses and rental expenses, a list with a total at the bottom is preferred compared to a collection of receipts.

If we’re having to sort and add up a lot of receipts, it’s probably costing you in additional fees. Instead, provide us with a total for each category of expense. 

Tip: Ask your pharmacist to print a list of your prescriptions purchased over the past year. It’s much easier than keeping up with each individual receipt from your pharmacy. In addition, it eliminates the risk of losing a receipt and leaving out some of your prescription expenses. 

4. Take your documents out of the mailing envelopes prior to giving them to us.

If you want to go a step further, remove staples and use paper clips instead. I know this sounds silly, but if your documents are ready to be scanned when we receive them, we can start working on the return quicker. This means we can get the completed return to you quicker.

Tip: Don’t write anything in pencil because it doesn’t show up as well after being scanned. Instead, use blue or black ink. 

5. If you would rather submit information electronically, talk to your accountant about the different ways to do this.

At Aldridge Borden, we use TaxCaddy. This system makes it very simple to submit tax documents in your client portal. You can submit documents to TaxCaddy in multiple ways including taking a picture on your phone. For more information on TaxCaddy, you can visit TaxCaddy is a safer, more organized way of submitting your tax documents electronically. This also means you will have your documents in electronic format for file retention instead of keeping paper documents until time to shred.

Tip: Do not send tax information containing sensitive personal information (i.e. Social Security numbers, account numbers, etc.) via unsecured email. Instead, drop it into TaxCaddy or upload electronically through another secure method.

6. Look through the tax documents from your prior year tax return to ensure you have all the information that will be needed for the current year.

If we needed it to prepare last year’s tax return, we’ll most likely need it for the current year.

7. Keep personal documents separate from business documents.

Don’t intermix them together in one folder, but instead, use different folders, binders, manilla envelopes, etc. This helps us quickly identify which documents to use for which return.

If you have any questions about organizing tax documents, don’t hesitate to reach out to your tax advisor at Aldridge Borden. 

Author: Sara Davis, CPA

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