8: Reducing the Pressure of Tax Time
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Welcome to episode eight of Permission to be Messy. I'm your host, JoAnn Krall. And today I'm talking about taxes. Taxes taxes, taxes. If you were in the 5% of people who actually clicked on this episode to listen, I commend you because this, this isn't a fun topic.
It's just not, it's not fun taxes, or they're boring. Right. don't get me wrong as a former accountant, when I was younger. I actually loved filling out tax forms, but that was back in a time when things were much simpler, the tax code was simpler. The forms were easy to fill out, just. Everything was easier today. Everything is convoluted and even if you have somebody else do your taxes, you still need to gather up all of the support documentation, whether it's in paper or digital form or even both, which can just be a whole 'nother issue.
So why does so many of us wait until the last minute to do our taxes? Especially if we own our own business. There's many reasons. Of course. But the two major ones I see. The first one being, we possibly owe money. So obviously we don't want to pay that. So we wait until the last minute. But. Another huge reason is because we're disorganized. And so the thought of putting it all together is super overwhelming.
You have to gather up all that documentation. And if you don't have all those things organized and ready on hand, it can make an already icky process, even worse.
Now, before I go into anything today, I want to let you know, this is just for educational purposes and I am not giving you any tax or financial advice here.
So let's talk about organizing those documents. At the time of this recording, we're about a month away from the tax deadline in the U S. And there is plenty of time. There is plenty of time. Do not panic. The process that I'm going to talk about is something that you technically would start before the beginning of the year but you can start it at any time. And refine it as you go.
It's important to have all your tax documents in one place. So the first step is to simply designate where are you going to hold things and to be in line with permission to be messy, it can be just one big bucket and the bucket can be a box, a bin, or a folder, whether it's a physical folder or a folder in your email or on your computer.
Then you can just start to gather things, as you go through your emails, pull out any of the emails that apply to tax and move them over into the folder.
Or maybe email is out of sight out of mind for you. So you actually need to take the time to download the document and put it on your computer in a special folder. Do what makes sense for you?
And then do the same for any paper documentation you may get, whether it's W2's 1099's, any receipts. Anything that applies to tax.
Gather it all up. That's actually the first step of my seven step process to get your paper and your digital files under control, which I'm going to talk about right now.
My seven step process is called changes. I came up with this acronym because I was thinking about how we need to change in order to go from disorganized to organizes but we also need to make sure that those changes are small because when we try to incorporate big changes, we often set ourselves up for failure. So I was looking at the seven steps and it almost spelled out changes the way it was and I just had to change the name just a little bit of each step to make it work.
So, what does changes stand for? It stands for Collect, Harmonize, Assign, Narrow, Group, Evaluate, and then systems.
In the collect step we're simply gathering everything up. So for paper, that's gathering all the loose paper all around our home or our office. For harmonize, we are reducing the inflow and we're getting our tools ready for the process. For assign it's about having a place for new items coming in. And then when we get to the next step narrow, that's all about the purging. And this is probably going to take you the longest. We're going to work from our collection and we're going to work from our inventory for digital. We are going to start reducing as much as we possibly can.
You're just going to keep reducing, reducing, reducing. And after you've reduced as much as you can, then you're going to do a high level sort. Now this can look different for everybody.
Personally, my high-level sort is. To do, To pay, To read and To file. So after you've grouped everything, this is where you're going to be in your evaluate stage. You're going to be asking yourself a lot of different questions about what has worked for you in the past. What hasn't worked for you, what kind of items do you have to file? What kind of filing system do you think you're going to work with?
And all those questions are going to bring you into then the final phase where you're going to actually create your systems.
So for the purpose of this episode and getting you ready for tax time, the important thing is that if assigned a place for your stuff to go. And that you collect all your tax stuff.
It doesn't mean that you can't start the whole process, but if you just want to focus on tax, you can do that. I just want you to have that process in mind so that when tax time is over, you can get started and you can actually finish this year out with organized files and be ready. So that next year tax time.
I always say this, it will be a breeze. It will be, it'll be so much easier when everything you have is organized.
A friend actually asked me about this the other day to talk about how long do we hold on to documents. And I always have to say, you have to ask your accountant, your lawyer and your insurance agent when it comes to anything important.
You've probably seen those checklists out there. those are just guides. there are certain things that we have to hold on to forever birth certificates. maybe a death certificate of a loved one or, our passports, things like that, though. There's some things that are very obvious that we need to hold onto.
But unfortunately with everything, there's no one answer. As far as what you can let go of. So it's really important to take it on a case by case basis.
Now I only briefly touched on my seven step process, but I want to let you know that I have a free ebook guide it's PDF guide that you can download. It's at joannkrall.com/7-steps. The number seven, not the word.
And I'll put that link in the show notes. But it's a free guide. It walks you through the full seven steps. There's resources on how to reduce your junk mail. There's the questions that you want to ask yourself before you head onto systems, but it really details out what the process is. So I invite you to download that for free and as always, I'm wishing you much productivity, peace, prosperity, and the permission to be messy. Thank you for listening.
