If you are working on your Income Taxes right now, I bet you are wishing that things had been kept in a more orderly fashion last year. It may to too late to correct your filing
system for this year, but how about starting right now to organize for next year. It will help to make the process a lot easier and less stressful. We all need less stress in our lives.
HERE IS A SIMPLE METHOD (courtesy of Claire Moore, who teaches business and computer skills in Northern California) I have “Canadianized” the content and added a few tips of my own.
1. Purchase Necessary Supplies
Visit your favorite office supply store and make the following purchases: (these can often be found in thrift stores also for
pennies (oh, I forgot…..we don’t have pennies…..so make that nickels).
- One letter-sized pocket file that expands to three and a half inches (approximately $3)
- Several file folders (less than $1 each)
- Labels for your file folders (approximately $3 for a pack of 250 labels)
2. Create Labels
Label the expanding folder for the year. Then, create a label for each file folder as follows:
- Personal expenses, such as clothing, books, groceries, and entertainment
- Utility bills
- Large purchases and home improvements
- Bank statements
- Credit card statements and receipts
- Pay stubs
- Tax records
3. Organize Your Documents and Files
Once you have your folders labeled, start organizing your filing system. As the year progresses, you can add more folders to hold receipts for new categories that you need to keep track of, such as expenses for education, pets, or travel.
Place your file folders inside the expanding folder, and keep your filing system securely tucked in a drawer or filing cabinet. Whenever
you make a purchase or a bill payment, make it a habit to immediately place your receipt in the appropriate folder.
To help stay on top of bill payments, create a folder labeled “Bills to Pay.” Keep this folder in a highly visible location(If you are visual, I might also suggest that you make this folder a distinctive colour………..mine is bright yellow) so that you are reminded to go through it regularly to pay your outstanding bills. After paying each bill, place the record into the appropriate folder in your filing system.
You should also create a folder labeled “Needs Attention.” For instance, if you need to make an inquiry regarding a suspicious charge on your credit card, or if you need to contact a vendor that didn’t give you credit for having paid your most recent bill, you should keep a record or reminder in this folder.
Daily Filing Method
By implementing this system, you can reduce the time you spend searching through scattered papers by having your files arranged in organized, appropriately labeled files. Create a daily routine to keep your files consistently and properly maintained:
- Collect the mail and go through it at your desk or kitchen table.
- Open each piece of mail and set aside junk mail and envelopes to be recycled.
- Place bills in your “Bills to Pay” folder.
- Place receipts in their proper folder. For example, medical services summaries
should be put in your “Medical/Dental” folder.
- Anything that needs immediate attention should go into your “Needs Attention”
folder so that you can take care of it quickly.
What to Keep and for How Long
In most cases, you should keep records for at least three years, as the CRA typically searches three years into your history during a tax audit. However, the CRA may choose to search an additional three years into your history, so for that reason it’s advisable to save records for six years. This
six-year period starts at the end of the tax year to which the records relate.
Here are some records you should keep for six years:
for any deductions that you listed on your tax return
statements for transactions reported on your tax return
relating to the sale of a home or other property reported on your tax
of income and expenses reported for your small business on your tax return
Every piece of paper that supports information reported on
your tax return should be saved for the six years following the date you filed.
However, there are some records you will want to keep
- Tax returns
deeds and closing statements
of your contributions to your retirement plans
planning documents, such as a power of attorney or trust agreements
Paperwork to Discard
After you’ve completed your tax return for the year, there
is some paperwork that can be discarded. Unless it relates to your tax return,
you should be able to get rid of following items:
deposit slips and ATM receipts
cable bill receipts
With identity theft so prevalent, I suggest that you shred
everything. You can often pick up a
small shredder on buy and sell sites online for a minimal amount of money.
There’s no time like the present to start organizing your
paperwork. The sooner you set up an organized filing system, the sooner you can
reap the rewards of a decluttered home or office. You may also find it much
easier to access any paperwork or record anytime you need it.