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Year-Round Tax Planning

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Year-Round Tax Planning

This playbook outlines strategies for maintaining and organizing financial records and documents throughout the year to streamline the tax filing process. The goal is to ensure efficient record-keeping practices that lead to a simpler and more accurate tax filing season.

Step 1: Record Setup

Create designated folders, either physical or digital, for various tax-related categories such as income, expenses, donations, and investments. Label them clearly for easy identification and access.

Step 2: Regular Updates

Update your tax folders by filing away receipts, bank statements, and other tax-related documents on a weekly or monthly basis. This habit prevents the accumulation of documents at year-end.

Step 3: Expense Tracking

Keep a logbook or use a digital app to track expenses that are tax-deductible. Include the date, amount, purpose, and relevant notes for each transaction.

Step 4: Income Record

Maintain a separate file for all income statements such as W-2, 1099, or any other forms that report income. Check regularly to ensure that all sources of income are documented.

Step 5: Charitable Contributions

Document any charitable donations by keeping receipts, acknowledgment letters from organizations, and a list that notes the date and value of each contribution.

Step 6: Tax Law Awareness

Stay informed about changes in tax laws and update your record-keeping practices accordingly to take advantage of any new deductions or credits.

Step 7: Consult Professionals

Schedule semi-annual meetings with a tax professional to review your records and ensure you are on the right track. They can provide advice tailored to your financial situation.

Step 8: Digital Backup

Create digital backups of all physical documents. Store them in a secure yet accessible location, such as an encrypted external hard drive or a cloud-based service.

Step 9: Review and Categorize

At the end of each quarter, review your financial records. Ensure every document is properly filed and categorize any miscellaneous receipts or records.

Step 10: Year-End Summary

In December, compile a year-end summary of all records. Double-check for completeness and accuracy to ensure a smooth transition into the actual tax filing process.


General Notes

Receipt Retention

It is critical to retain all receipts that may relate to tax deductions for at least seven years, as this is the period of time during which the IRS can audit past returns.

Digital Security

When storing sensitive documents digitally, prioritize security measures such as strong passwords, two-factor authentication, and regular backups to prevent data loss or theft.