How to Alleviate Tax Pain – Part 2

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Tax pain

 

Three Steps to Make Tax Time Less Painful

In Part 1 of this series, I discussed the primary source of tax season pain, which to me is that we don’t actually do what we know we need to do throughout the year to be prepared for tax season. This causes us to scramble at the last minute, making it difficult for us to do the things we need to do well. As a result, it becomes difficult to file our taxes in a way that doesn’t cause painful levels of stress, tension, and anxiety, both during the filing process and after the taxes have been filed.

So, now that we’re aware of the source of tax season pain, how do we alleviate it?

Forbes recommends that –

“Tax planning is a year-round process that doesn’t have to be difficult or time consuming. By giving your tax situation some attention several times throughout the year, you may be able to reduce not only your tax bill, but the energy you spend worrying about it.”

And Olivia Mellan, a psychotherapist and financial self-help author based in Washington, D.C. suggests that

“To avoid last-minute (tax) stress, file early and break up the job into little pieces…”

Along these lines, I’ve found that it actually is possible to put a simple system in place to make tax time less painful. The system alleviates the pain of tax time by making it easier for us to do what we need to do, so that we actually do what we need to do, when we need to do it, by –

Step 1 – Establishing a single digital repository as the destination for all the information we need to collect.

Step 2 – Automating the parts of the tax information collection process that we are able to automate, so that we don’t have to manually do some things.

Step 3 – Making it easy for us to manually do what we can’t automate, so that we actually do the things that need to be done manually by us.

Now, let’s discuss each one of these steps in greater detail, to discover how they can provide you with tax pain relief during tax season this year and for years to come.

Step 1 – Establishing a single digital repository as the destination for all the information we need to collect.

This step is the foundation for making your life less painful during tax season, by establishing a single digital repository to store all the information that needs to be collected to file your taxes. This single digital repository is where you dump any and all information that may be related to your tax filings, throughout the year.

Once tax time rolls around, you then have everything you need in one place, no matter when you received it throughout the year or who sent it to you. Establishing a digital, rather than paper-based, repository has the added benefit of not just making tax time easier, but also helping you go paperless as well. If you’ve been intending to go paperless for a while, establishing this single digital repository for your tax information could be the catalyst you need to get your paperless efforts underway.

The single digital repository you choose, in addition to being able to hold the various document types you need to collect, should make it very easy for you to get the information you need to collect into the repository. This is a key point that can sometimes be overlooked by people who have tried and failed to establish a single digital repository for tax information. The single digital repository doesn’t do you any good if getting the information into it is such a pain that you end up not using it :)

My single digital repository of choice is Evernote. I establish specific notebooks in Evernote for my taxes, then use the many tools Evernote provides to feed tax-related information into the notebooks as the information is received, throughout the year.

Step 2 – Automating the parts of the tax information collection process that we are able to automate, so that we don’t have to manually do certain things.

Once we have the single digital repository established, we can then automate some of the tax information collection tasks. Automating these tasks enables them to be performed automatically throughout the year, with minimal interaction from us. This is where systems like FileThis are extremely useful. FileThis integrates with Evernote, so that any of the financial statements you may need at tax time are ready for you, when you need them, in Evernote notebooks.

The beauty of this approach is that you only have to connect your financial accounts to Evernote once, through FileThis. After that, FIleThis checks your financial statements on a regular basis and adds new ones to your Evernote notebooks when they become available.

Whether you’re itemizing your personal deductions and need to review expenses, donations, and/or charitable contributions from your bank or credit card statements or a business owner who has to reconcile your accounting system with financial statements, using FileThis is an easy way to make sure that these statements are available to you, when you need them.

This happily means no more scrambling around to download individual .pdf files of statements or having to call your financial institution and pay them for “research requests” to pull statements for you that may no longer be available online, at $10-$15 each. If your financial institution requires you to physically go to a branch to do this, as a couple of mine have in the past, you also save the considerable time and hassle of having to go to your bank, wait for a representative, order the statements, only to be told you need to come back a second time, in a few days to pick them up, as it takes their back office 2-3 days to fulfill the request.

Speaking from personal experience, this process can be a killer and just avoiding it alone is reason-enough for me to be a lifelong customer of FileThis!

The other process I like to automate, in a slightly different way, is expense receipt collection and find that Expensify is a great tool for this purpose. Expensify allows you to to pull transactions from each of your financial institutions into your Expensify account. You can then run expense reports on a regular basis, i.e. monthly, quarterly, or even annually.

The reason I like to do this is because Expensify automatically generates IRS-approved electronic receipts for many of your expenses. So, if you run these regular reports, not only do you have another itemized record of your spending, the process also saves you the hassle of having to keep or scan all of your paper receipts, since now the only receipts you have to keep or scan are those few that Expensify wasn’t able to generate electronics versions for. If you happen to use a virtual assistant, like Fancy Hands or Zirtual, asking them to generate these reports for you on a regular basis and save them to the appropriate tax notebook in Evernote is a great task to ask them to do for you.

Step 3 – Making it easy for us to manually do what we can’t automate, so that we actually do the things that need to be done manually by us.

There are going to be some tax information collection tasks that you just can’t automate and that you need to do manually. The key to these tasks is to make them as easy and frictionless for us to do as possible, so that we actually do them.

Once again, the key here is how easy your digital repository makes it for you to get the information into the repository itself. Evernote provides a number of great tools and extensions you can use to get the information you need into your tax notebooks. A simple desktop or mobile device app scanner also goes a long way toward making your life easier at tax time, for example to get those various notices that the IRS still insists on sending via snail mail, as well as other paper-based forms, into your repository throughout the year.

If you follow these principles, you’ll be set-up nicely to make take time less painful on yourself. If an accountant helps you with your taxes, you’ll probably be making their life less painful as well, by getting them what they need, earlier, and in a format that’s easier for them to process.

One of the best things about a system like this is that once you set it up, with just a little maintenance here-and-there, it’s available for you to use, tax season after tax season, year after year. Additionally, even the time you invest in the initial set-up should easily pay itself back in the time the system saves you, not to mention in the pain it alleviates!

 

About the author: Christopher Remus

Chris used to really dread collecting all the information needed to file taxes. Since he was spending way too much time collecting various tax forms, bank statements, receipts, etc., this would lead to him being super-stressed and behind on a lot of other important things during tax season.Over the past few years, Chris developed Tax Pain Relief to make the tax information collection process a lot easier and better for himself and is now excited to share that relief with others.