The biggest tax problem that people face is not what you think.
It is not the tax laws, rules, and regulations. If you are an individual or business large enough to pay for and utilize the services of a CPA firm, you will have people guiding you through your business, accounting, and tax needs. Moreover, if you are an everyday person who files your own tax returns through TurboTax or other do it yourself software, you likely already do your own basic research that suffices for your needs.
The biggest tax problem is how people collect and store their data. As a CPA who has worked in the tax industry, this is the biggest problem I have seen. It is a problem also faced by all of my past managers, senior managers, and partners as well. The problem is people do not have good systems and processes in place to make sure that their data is complete and accurate. I have often seen people missing information and documents because they misplaced them somewhere else months ago or simply forgot about it. This causes more stress for everyone involved.
I have talked about looking into our systems and processes before in previous blog posts about Atomic Habits by James Clear and one of the lessons provided by the book. So, what are some actionable steps we can take to solve the problem?
Here are two easy steps:
- Set up a password manager
- Use a box, seriously, use a box
Use a Password Manager To Solve Your Biggest Tax Problem
A password manager can help you solve your biggest tax problem. It will give you a centralized location for all of your accounts and passwords.
Using a password manager is like night and day. It makes having an endless number of accounts easy to manage. Once you see how easy it to navigate everything after using it, you will never want to go back.
So how does a password manager work? In practice, you will download a browser extension, an addon to your web browser such as Google Chrome. Once you set up and log in to your password manager account, it will automatically log you into every website that you have stored with Lastpass.
I have used LastPass myself and attest to its quality. It is free and easy to use. You can use it on your desktop and all your mobile devices. Importantly, it also allows for multi-factor authentication for security. If you have not heard of it, this will allow you to set up your account to use a variety of login methods concurrently for added security to prevent people from hacking into your account.
Instead of worrying about if you have the latest electronic copy of the data you need, you can get in and out of all your accounts as easy as clicking a website. While it is important to back up your data, this will provide you comfort that you can easily pull the latest data at any moment in time with little hassle.
Use a Box to Solve your Biggest Tax Problem, Seriously, Use a Box
Paper is still an important part of our daily lives even though it is almost the year 2020. It still will be years from now.
The first step to dealing with paper isn’t complex.
Use a box. Plastic. Cardboard. Big. Small. Use some kind of container like a box that you can reliably store all your paper documents in. Throw all your paper in there. Then sort it out later. Do this so you don’t have to hunt through a million different places. Use multiple boxes if you want if you need to sort things out. Use a file box if that suits you.
A simple box will do. It doesn’t need to be fancy. It can be plain:
The point is that having a centralized, organized location for your physical documents will save you massive headaches later on. If you think something is even remotely relevant, toss it in the box.
As a CPA, I have seen this used to great effect in the real world. For the tax needs of the individuals and businesses I have worked on with my colleagues, It was the difference between smooth sailing and a very stormy ride. It can and does make a real difference.
It is one of the simplest steps to tackling the fundamental problem of data management.
Only you Can Take Action
When it comes to the biggest tax problem you’ll face, it comes to you to solve it. No one else can help you with this. Your CPA cannot help you find a missing document that was sent to you several months ago. They and you cannot go back in time to help you keep better track of your data, whether it is for your personal, business or tax needs.
Use these two simple solutions together. You don’t need to drive yourself crazy in trying to keep everything purely electronic or purely in hard copy. And these are not the final word on the fundamental problem of data management. But these are two real actionable steps to get you started on the answer. And there are many useful tools out there like Google Docs that can help you track and manage your data.
It’s about getting started. It’s about thinking about how we can make one percent improvements that compound and grow. Stack enough of these small, seemingly insignificant habits and you’ll be shocked about how much you can improve.
It is a mindset of thinking, growing, and aspiring to be more.