03/ 14/ 2006
by Tamara E. Holmes
Each year, small-business owners scramble to get their paperwork together to pay their taxes. While you're wrapping up the 2005 tax year, why not get a jump on next year by getting organized for 2006 now?
While your first thought may be to tackle 2005, you can save yourself plenty of time and stress by taking a few steps to prepare for the future today.
Let 2005 guide you. Since you're already in the mindset of getting your finances together to pay your taxes, now is the perfect time to prepare for next year. As you gather your tax documents this year, pay attention to the types of documents you need. Those are the ones you'll need to save for next year.
Take a look, for example, at the types of receipts you've amassed in 2005. Those are the kinds you'll amass this year, too, so create a file now for each of those receipts. Next year, you'll immediately know where to find them when it’s time to do your taxes.
Keep it all together. As you prepare your organization system, find a centralized place to keep everything. A file cabinet designated solely for tax documentation or a subdivided box with folders for tax-related paperwork will do the trick. That way, when it’s time to prepare taxes, you won't waste time looking for everything you need.
Summarize the contents. A tax-document filing system does you no good if you can't find anything in it. A list of the folders and compartments included and a summary of what you will find in them will make it easier for you to keep track of everything throughout the year. As you add something to a folder, add it to the list.
Make it visual. If it’s easy for you to differentiate between folders and compartments for various types of documents, it will be easier for you to stay organized throughout the year. Consider using color-coded folders or tabs, for example. You'll save time in the long run if you know that certain types of expenses go into the blue folder, rather than sifting through eight or nine folders that all look alike.
Create a routine. The best time to file a receipt or another tax-related document is the minute you get it, but in the real business world, that might not always be possible. Designate a place to store tax-related documents that need to be filed and a time, such as twice a week, to file them. If receipts and other paperwork pile up, they become intimidating, and you become more likely to discard your organization system altogether.
Hold onto the past. Because you should hold on to business-related tax documents, such as 1099s and receipts, a minimum of seven years, you'll want to find a place in your filing system to store past documents. You'll also want to make room for documents related to depreciating business assets, such as computers or other equipment that you will claim over multiple years.
Purge the unnecessary. Now that you've created your system, get rid of all of the documents you don't need. Use a shredder to make sure any sensitive business data does not fall into the hands of the wrong person.
Personalize the system. While some organization tips are universal, you'll find that some suggestions work better for you than others. If you find through the course of the year that certain aspects of your filing system don't work, don't be afraid to change them. By scheduling time to tackle taxes throughout the year, you'll be able to make adjustments to your routine as you go along.
It will take some time to put together a system for organizing tax-related documents that works. But by taking a few hours to get organized now, you'll save yourself the extra time it would take to scramble to get your paperwork together this time next year.
