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Be Organised For a Stress-Free Tax Return

02 January 2009   (0 Comments)
Posted by: Author: Jeanne Viljoen
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Be Organised For a Stress-Free Tax Return

If you are an individual, you more than likely do not have your own accounting department getting your records ready for tax return. This ends up being a last minute scramble and results in stress and sleepless nights. Even if you have a tax consultant who completes and submits your tax return, you still have to get all the relevant documents needed for your consultant to complete the return.The good news is that there is a way to reduce the stress and effort. The secret is to keep your tax records organised throughout the year. Even though filing season for individuals came to a close on 23 January, you can start organising right now. All you have to do is to follow this easy, five-step programme to take charge of your tax returns.

step 1 – Gather

The first and most important step is to gather information on all the data and records you will need to complete your tax return. It is important to understand what can or can’t be deducted from income and I would strongly suggest you get the advice of a tax consultant. Even if you are planning to complete and submit your own returns, it will be worth your while to invest in at least one consultation to get all the required information. Put all your tax records in one container and don’t forget those slips in your wallet, car, briefcase or junk drawer. If you currently don’t have a system in place, this might prove to be a bigger exercise than you anticipated, but it will be the last time that you have to go through this.Once you have all your tax information in a central place and you know all the different categories of records you will require for your tax return, the next step is to sort them.

step 2 – Sort

Sort your records into broad categories like income, expenses and statements. At this stage, we are keeping the categories very broad in order to prepare for the step where we start systemising.

step 3 – Purge

Purge any records you do not need as you go through the sorting process. Keep only those records that are proof of your taxable income and expenses as per the information you gathered in step 1.Either file the receipts or records you do not need for tax purposes in a separate file if you need to keep them for guarantees, or shred them if you -do not need them.

step 4 – Systemise

Create a spreadsheet or word document where you use a new sheet or page to indicate a different sub category of income, expenses and statements. Try and keep the categories fairly simple and add notes to guide you on what kind of records should be filed in each category as advised by your tax consultant. Here are some examples of category pages:

Page 1: Bank Statements

Page 2: Vehicle Expenses 

• Travel Log  

• Parking  

• Insurance  

• Repayments

Page 3: Income 

Page 4: Tax Certificates 

• Annuities 

• Income Protection

Page 5: Phone Expenses 

Print each category on a separate page and use it for future filing categories. The simpler your filing system is to use, the more likely it is that you are going to keep it up. Choose the best filing solution to keep your records. You can use a filing cabinet or a concertina file. Whatever solution you choose, it must be easily accessible so that you can file your tax documents as you receive them. Keep in mind that you have to keep your tax records for at least five years. Ensure that your filing solution caters for this. One way is to have a flip file for each year and to merely drop the file off at your tax consultant at the end of the tax year. If you have a lot of tax deductible expenses, use some kind of financial record keeping software (it can be a package or as simple as a spreadsheet) to keep a running total throughout the year.

step 5 – Maintain

Now all that remains is to keep the system in place. File your tax records as you receive them. If you can’t file immediately, make sure you have a special ‘tax container’ where you can place your records and then file them at a later stage according to the system you have already created. At the end of the tax year, you can drop it off at your tax consultant or do it yourself – at least you will have all the records at hand in an organised way.You will have your spreadsheet or word document with all your categories. All you’ll need to do is print and prepare your files for the next tax year.Simply empty the paper filing system you used for this year and place all the documents you remove in an envelope, file or plastic container labelled Tax Documents – [year] and archive in a safe place. You will be able to re-use the filing system for the new tax year.

Less stress? Certainly.

Source : By Jeanne Viljoen (TaxTALK)



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