Paying taxes is one of the ways a citizen can help his or her country. It helps the government in undergoing projects that are aimed to make the community better. However, if there’s one thing that everyone dreads during the tax season, that would be the filing of taxes. Depending on someone’s personality, filing taxes can be as easy as walking in the park or as easy as walking in the park full of zombies all around. Filing can be an all-year affair. You need to keep it up in order to have a better result and avoid consequences.
CONSEQUENCES OF UNDERPAYMENT PENALTY
An underpayment penalty is a penalty given by the IRS when the taxpayer failed to pay his or her complete income tax or other tax in a given time span. You can avoid this payment if you owe less than $1,000, or if you have no tax liability the previous year, or if you paid at least 90% tax from the current year. However, there are other reasons why you can miss your deadline in paying your taxes, and one of the possible causes of the delay is your disorganized tax documents. Here are some of the tips that can make your filing job easier and more productive.
KEEP EVERYTHING IN ONE PLACE AND PUT PROPER LABELS
Keeping everything in one place is the most important step in organizing your tax documents. It is recommended that once you started receiving receipts and other documents, you must file as you receive. It is recommended to have an envelope or a binder to store your files and reduce the chance that these files will wind up somewhere else.
It is recommended to store the files in a place where it would not likely reach other people, like a cabinet or in your study. If you have a lot of documents to store, you might need a filing cabinet to make things more organized. Separate the files from your income tax and from your business taxes to make finding things easier.
STORE AND MAINTAIN EVERY FOLDER IN AN ORGANIZED DESKTOP FILING SYSTEM
For those who don’t have the time to meticulously arrange their documents, or if the documents can be stored in a single envelope or binder, it is acceptable to not establish a desktop filing system. However, if there’s a lot of important documents, you might want to have things sorted out for better search and retrieval. In this way, it would also be easier for you to know if there’s something missing in your documents.
Folders with proper labels are important tools that make organization easier. Every classification should have an individual folder in order to avoid mix up in of documents. It is fine if you reuse some folders as long as re-labeling is also a priority. Also, consider separating your personal tax documents and business tax documents as well as organizing files on a yearly basis separately. You can organize your files in a way that is more useful and easier to manage for you. Here’s a tip in organizing your files: make a section for each income, expenses, donations, properly and sales and utility bills if applicable.
FILE AS YOU RECEIVE YOUR TAX ITEMS
Filing and organizing your taxes is an all-year duty. Instead of dumping all the paper and forming a large and scary pile of receipts and other documents, it would be easier if you just file each document you receive at the same time you receive it. That’s because if you pile it in a corner and just sort the papers out during the tax season, you will spend most of your time sorting things on the floor.
Filing things in the right folder can take up only a couple of minutes of your time. Things will be easier for you and/or your accountant. You will avoid sitting on the floor sorting your things, and the most important of all is that you’ll likely avoid missing your deadline. There is also a risk that while you’re on the floor (or table) sorting things, some of your papers will wind up somewhere else. In addition to all these things, you wouldn’t want to have an error in filing your taxes because you rushed sorting your things. Be prepared and then you can relax.