Tips for the Investor to Keep Organized for Tax Season

Reliablecounter Team
With the year wrapping up shortly, it is becoming increasingly apparent that tax season is almost upon us. The tax season begins roughly around the time that imperative tax documents are released, usually starting as early as January, and wraps up around the time of the tax deadline on April 15. This coming year, the tax deadline falls on a Thursday which will certainly become a day forever infamous for procrastination. There is so much to do ahead of time in preparation to file taxes online and for some reason, it is just as easy to put off arranging necessities in advance as it is to stress on the very last day prior to when taxes are due.

It is imperative to maintain financial records throughout the duration of the entire tax year. For no individual is this more relevant than he or she who participates in investing. Investors must keep proper documentation of all of their investment activities, whether that be done through print-outs or files saved onto the personal computer, or tablet.

File Your Documents

Whatever your investment strategy might be in terms of how much you diversify, always keep files of individual categories. For example, let’s say you do your online stock trading with E*Trade and you hold stocks with Apple, Amazon, and Macy’s. You should create a file—in a physical filing cabinet or a virtual file on your computer—labeled stocks. You should then create a file within this file called E*Trade, which will subsequently contain files within it titled Apple, Amazon, and Macy’s.

You will put documents within these files that outline the activity of these stocks for the year, ideally organized by ascending dates with the documents of the earliest dates preceding those of the most recent dates. This way when it comes time to file your SEC insider trading forms, you will not be at a loss.

Consider Organizing Your Forms By Date

It may be possible that, for you, it is more convenient and more importantly more practical to organize your paperwork by date. When it comes time to file your SEC 4 form, you will need to know the exact dates that certain trades took place. This will require filing through print-outs or digital files for many months worth of trading activity. It is recommended that you earmark files containing paperwork that documents notable trading activity and labeling these earmark tags with the date of activity.

Backup Your Files

Should you be storing this information in a digital format on your computer, it is absolutely essential to back up your files. You can do this by saving your files to a cloud software like OneDrive or you may also choose to effectively complete this save by backing up your files to an external thumb drive. Either way, it is critical that your information be saved to multiple locations digitally. While it is critical information, you may even want to consider saving the files to three locations total.

Do Your Research Ahead of Time

Prior to tax season rolling around, spend your free time doing online research about the Internal Revenue Service requirements for reporting income earned on investments. The IRS has stringent guidelines when it comes to reporting trading activity and investment earnings that should be adhered to carefully. There are a number of forms that may be used in order to accurately document your investments to the IRS, including a set of 1099 forms – the 1099-B, 1099-DIV, 1099-INT, and 1099-R. You should find out ahead of time which of these forms it will be necessary for you to employ in your reporting of taxes this coming year.

There is no need to wait until the last minute in order to do your preparations for tax preparation, so to speak. You will want to log and properly organize paperwork for all of your investment and trading activity into respective files. You may want to consider organizing these files by date, as well, as it can be efficient when reporting the date of trading activity on your taxes. Backup all of your files onto external drives for those that are saved digitally. Also, ensure that you have done all the research you need about which tax forms you will need well in advance to actually preparing your taxes.