Tax Thursdays: 5 Steps to Getting Your Taxes Together

If you are still basking in the glow of holiday joy, the next 5 letters I write may snap you back to reality…


Yes, I said it. And, yes, it is that time of year again. It’s time to get organized. But never fear because taxes aren’t really that daunting of a task, as long as you’re properly prepared. I’d like to give you a few steps to make sure the process is as painless as possible:

Step 1: The Physical Gathering

Let’s assume all of your receipts are not well organized, and sitting in a file cabinet with colour-coded, alphabetized folders. If your file cabinet looks more like a shoebox or the back right pocket of your jeans, it’s time to get everything into one central location. Don’t worry about organizing at this stage. The important thing is that you have ALL of your receipts in front of you.

Step 2: The Digital Gathering

Chances are good that your digital receipts are scattered throughout your digital house too. Some might be in email, others in local folders. You want to get it all into a single folder on your computer. Search through email and save any relevant attachments. Save or print out statements from all financials institutions, and PayPal reports for the year if applicable. If you use Freshbooks (or something similar), print out invoice and expense reports for the year. You can match your receipts to these statements later.

Step 2.1: The Hand Off

If you are planning on getting a bookkeeper or accountant to prepare your taxes for you, this could be the time where you do the hand off. Place the paper in an envelope or box and drop/mail courier it off. Copy the digital files to a flash drive or copy into a shared folder. If you want to reduce your bill, do this after Tip 3 instead.

Step 3: The Organizing

Now that you have everything on your desk and on your screen, let’s get it organized. Stack the papers into tax-friendly categories. If you also have a home office, make sure to keep house expenses (utilities, mortgage, etc.) in their own stack too. At this point, you can do one of two things with your digital receipts:

1. Print them out and add them to the proper stacks.

2. Setup sub-folders with the same categories you used for your paper receipts, and place each file into the right folder.

The other thing you should do at this point is look for duplicates, ensuring you don’t have a paper and digital copy of the same receipt.

Step 4: The Calculating

Now that you have everything in stacks, let’s do some calculating. Yes, you could do this while you’re doing your return, but I think it’s a much safer idea to do this now, combined with Tip 5. Go through each stack with a calculator, and get a total for each category. Depending on which tax(es) you track, make sure to pull out that data too. When you’re done, each stack will have:


For the sake of simplicity, have each total include both the physical and digital receipts.

Step 5: The Review

In my opinion, this is the most important (and most often skipped) stage of the process. Ideally, go away for a few minutes and come back with fresh eyes. Now, take a look at the numbers you’ve calculated. Do they make sense? Maybe the actual math adds up, but the logic doesn’t. Did you really spend $10,000 on office supplies, but only $17.50 on advertising last year? If not, review those categories.

Maybe there are duplicates, or you put those brochure documents in the wrong category. This would also be the time you could match up your receipts to your bank statements to see if anything is missing. Do the same with your income. You know how much money you “made” last year. If you routinely needed to use your credit card to pick up Big Gulps, maybe the $800,000 you came up with for a revenue total is a tad high. Once you’re satisfied that the totals make sense, then you’re ready to file.

Bonus Tip: Don’t Ever, Ever, Ever Do This Again!!

Let’s face it, this is a mind-numbing process. Nobody wants to scramble to get a year worth of books organized all in one sitting. Instead of enduring this a yearly ritual, consider changing your system in the new year. Start tracking all of your sales and expenses with a user-friendly accounting service. (hint: you’re reading the blog one one such service right now).

Or, if you have no interest in doing this yourself, consider enlisting the services of a bookkeeper. (hint2: you’re reading the blog post of one such bookkeeper) Either way, staying on top of your books, even on a monthy basis, will make this time of year much less stressful.

about the author

This is a guest post for the FreshBooks blog. FreshBooks is the #1 accounting software in the cloud designed to make billing painless for small businesses and their teams. Today, over 10 million small businesses use FreshBooks to effortlessly send professional looking invoices, organize expenses and track their billable time.