About Tax Season
Tax season is here. You pay taxes every time you get your paycheck, and on everything you earn, you pay taxes on everything you buy, and finally, you pay taxes on what you own are the three types of taxes that most people are familiar with.
It’s important to remember that every dollar you pay in taxes began as income. The point of collection—that is, when you pay the tax—is one of the most significant differences among the tax types described below.
Types Of Tax
Personal Income Taxes
Individual income taxes (or personal income taxes) are levied on an individual’s or household’s earnings, salaries, investments, or other revenue sources.
Many individual income taxes are “progressive,” which means that tax rates rise as taxpayers’ income rises, with higher-earners paying a more significant share of income taxes than lower-earners.
Time To Do Your Taxes
Given the stress associated with tax season, it is not uncommon to procrastinate on filing one’s taxes. While tempting and even understandable to a degree, it is a potentially costly and needlessly complication-creating habit, given that the majority of tax filers will receive refunds.
Furthermore, committing yourself to and investing in some early organization can empower you to navigate the seeming sea of documents and even master the entire process altogether. Though challenging, it is a doable and cost-effective endeavor that will give you peace of mind and a more significant piece of the pie. With all of this information in mind, the following are three strategies to keep all of your tax documents organized come tax season.
Invest Time
The first strategy to keep all of your tax documents organized is to make an upfront investment of time. Discarding bills and receipts is tempting and quick, while sorting through them, especially at the last minute during tax season, can seem to take forever. Investing some time upfront to get a filing system set up or to file every new document can pay off much down the line, saving them time and energy involved in frantically scrambling to find and gather all the necessary documents at the last second. In addition to procrastinating when it comes to finding and filing upfront, leaving electronic records online until they may be needed another costly mistake, as such items tend to be made free to access only for limited periods rather than indefinitely. Once this period elapses, you may be made to request them, which may take a couple of days and cost a transactional fee.
Centralize Storage
The second strategy to keep all of your tax documents organized is to make a centralized document storage system. This is simpler than it sounds and can be as simple as keeping a single designated location, be it a room or a folder, for storing documents and accessing them later. Within the broader trend towards digitization, paper documents and physical storage give way to electronic databases on digital devices. Paper documents are increasingly scanned to, downloaded from, and stored in electronic folders and widgets. This saves physical space and automates and centralizes the entire process significantly and efficiently.
Furthermore, the IRS accepts electronic documents. However, they must be stored securely in a cloud such as those offered by Dropbox or Google, regardless of whether or not accompanying paper counterparts to the digital documents are kept. Once such a system has been created, it must be used and maintained correctly. This can be done by selecting a specific time of day for consistently filing and depositing documents. For example, you can keep a physical folder on your person throughout the day for filing receipts, which can then be deposited in a designated area every night. Such a process, repeated throughout the year, can be beneficial and helpful.
Mind Time
The third and final strategy to keep all of your tax documents organized is to be wary of time limits and constraints. This can be done by following the so-called forever or seven years rule. Essentially, the IRS typically has three years to audit you once a return has been filed. However, if a significant error has been identified, this period can go back as far as around six years. Furthermore, there isn’t any statute of limitations for fraudulent returns or even outright tax evasion. Therefore, all returns and relevant forms should be kept indefinitely, while supporting documents should be kept for seven years. Should the IRS impose a bank or tax levy on you, a professional wage and bank levy removal service may be helpful or even necessary.
Tax season can be a stressful time that many have come to dread, and too many people cope by engaging in such unhealthy behaviors as procrastination or maintaining unhelpful habits. Although not always easy at first, it is more cost-effective and calming to invest some time. Effort upfront to stay better organized, cultivate better habits, and remain mindful of one’s situation and its constraints not to get overwhelmed.
