Since I am self-employed, I have to keep really good records for my tax return each year. I also organize our personal paperwork throughout the year in various file categories. This makes sorting through and matching up receipts a breeze when it is time to do our tax return. I also use an Excel spreadsheets for several things. I do my business checkbook through Quicken, and I am moving our personal checkbook to Quicken this year. In January, I start going through the files to make sure that I have a receipt for each of my business expenses. I have been doing our tax return since we got married, and I have learned which forms I need to have in hand by the end of January/first of February. I try to get our return filed as early as possible, since we usually get a refund. (Thanks to having 6 children.)
Last year we were audited by the state of NC for the number of dependents we had. I was required to send in a copy of all of our children’s birth certificates. We had the same number of dependents the year before, and all 6 of our children were born in NC. And I supplied Social Security numbers on the federal return. And yet the state still had to have documentation. I was not a happy camper, but I complied. If I did not provide the documentation, they would have retained our refund. Nice, huh?
So keep good records for your annual tax return. Keep important papers in a safe location. And finally try not to stress too much when you start compiling all of your information.