Mar 11 , 2020

Save Time and Money During Tax Time With This One Simple Tip

Save time with tax prep checklist

Filing your taxes can either be a huge pain in the ass or just a small pain in the ass, depending on how organized you are.

In this short article I’m going to share one simple thing that I do to make filing my taxes  just a little bit less of a pain in the ass.

Let’s jump right in.

My #1 Tip For Making Taxes Easy: CREATE A CHECKLIST

Ideally you have already learned about the power of checklists for your business and are using them to simplify your life, save brainpower, save time, and ensure you don’t drop the ball on important tasks that are easily forgotten.

If you haven’t, then I highly recommend the book “The Checklist Manifesto” by Atul Gawande.

Ever since reading this book several years ago, I’ve been creating and refining checklists for everything from setting business goals to taking care of my plants at home. And, of course, preparing the paperwork to file my taxes.

Tasks like doing your taxes are perfect for checklists because they are complicated, but consistent. There is a lot of information that you need to gather, but every year you pretty much need the same stuff. There might be one or two differences from year to year, but 98% of the information you need to gather is the same every single year.

Now, you could do what most people do and waste massive amounts of time and mental energy figuring out what you need every year. Or, you can create a list of things this year as you go, make a checklist, and then next year just follow the checklist.

Sure, it will take a few extra minutes to create, but it will save you hours of time next year and every subsequent year. It will also make tax time less stressful, and may even help you save money on taxes by minimizing mistakes.

Even if you pay a pro to do your taxes like I do, creating a checklist will still save you money. The more organized you are, the easier it is to do your taxes. If your accountant or bookkeeper knows you are disorganized and difficult to work with, they’ll probably charge you more and they may even end up making mistakes themselves which could cost you money.

The funny thing is that people who are disorganized and avoid paperwork usually end up spending more time on paperwork and dealing with problems that are generated from being disorganized than those who proactively organize. That means disorganized people have less free time, more stress, and often make less money.

Is Creating a Checklist Really Worth The Effort?

I can picture it now. Someone who is reading this is like…“I don’t have time for this B.S. I’m already swamped with all the other stuff I need to do. Now you’re telling me I need to create checklists, too! F you man!”

But, the point of this isn’t to have more stuff to do. The point is to have less. And unless you embrace the idea of working today to improve tomorrow, you will never have more time than you do now.

Spending time to create checklists may seem inconsequential. How much is saving a few hours in the future really going to change things?

Well, a LOT actually.

Creating one checklist might not change your life. But when you adopt the mindset of creating systems (a checklist is part of a system), you slowly and methodically do things that save you time, mental energy, and make you more effective. Over time that adds up, and it is the difference between the frantic business owner who works 70 hours per week and the cool, calm, collected entrepreneur who gets to go snowboarding in the middle of the week.

Personally, I hate paperwork just as much as the next guy. Maybe more. The idea of sitting in front of the computer for five extra minutes to create a checklist sounds boring. I’d much rather be building something, riding my mountain bike, or playing with my kids.

However, I’ve learned that doing certain boring things proactively gives me more time and money to do fun stuff. I’m going to have to do boring things anyway, so I might as well work smart so I can limit them.

Here’s How to Create a Tax Preparation Checklist

Your checklist will be really simple and will include the following:

  • A list of paperwork to gather (Bank interest statements, W2’s, 1099’s, Donation receipts, etc.). This is different for everyone, so it’s important to create your own.
  • Notes to yourself to help you remember anything important.
  • A list of tasks to complete (Things like reconciling your bank accounts in your accounting software).

Below is a screenshot of part of my checklist. I use a program called Evernote to store my checklists, which is nice because it allows me to organize checklists in a notebook and add little check boxes which I can tick on or off with a click of the mouse.

Tax Preparation Checklist

Of course, the first version of your checklist won’t be perfect. It will be missing things you need and will likely list other things that are unnecessary.

But that’s OK. The checklist isn’t really meant to save you time this year (although it can). It’s meant to save your time next year. It may never be perfect. It’s a living document.

The key to having a good checklist is to update it as you notice problems. As you go through it, you’ll see things that you are missing. Your accountant (or whoever files your taxes) will tell you that you need things you didn’t include. That’s ok. Just make a note to improve your checklist.

Every year it will get a little better, and you’ll become slightly more effective. Once refined, you won’t have to use precious brain power to think about what you need.

You won’t forget as many things and have as much back and forth with your accountant or whoever is preparing your taxes.

And, you’ll likely have fewer mistakes on your taxes which could lead to money savings.

So if you haven’t already, go create a tax prep checklist. And more importantly, be on the lookout for other ways to leverage the amazing power of a simple checklist.

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