As tax return time approaches, I am often contacted by those in need of paper and file reorganization to help them gather all tax documents. Here are some general tips on how to organize your tax records, and how to safely store them.
Consult your accountant. Be sure to check with your accountant about which documents you need.
Review the last year’s supporting tax documents. Look at the last year’s supporting tax documents and returns as you prepare for this year. If not much has changed, you will probably need the same information this year, such as W-2 forms, mortgage interest reports and vehicle tax forms.
Designate one area in your home for storing all tax records. If you keep all documents in one area, it will be much easier for you to find them when needed.
6 Options for Storing Tax Documents
- A labeled box. For example, a box labeled “2016 Tax Documents” will keep it all in one place. This is the simplest way to keep every tax document together, but it will need further organization during tax preparation time.
- A labeled folder. Similarly, a file folder labeled “2016 Tax Documents” in an accessible file drawer is a quick way to gather these papers together throughout the year. Anytime you come across one of these papers, put it into that file folder so you have it immediately available during tax time.
- Multiple labeled file folders. If you have several medical expenses, charitable donations, business expenses, etc. you can create a folder for each of those, and label it for the tax year. Create folders by year and category, such as: 2016-retirement, 2016-home repairs, 2016-donations, etc.
- A portable expanding file folder. Create one expanding folder for each year, then sort by category.
- Large envelopes. Store tax documents in large envelopes by year, with paper clips to separate categories.
- Digital file folders. If you prefer to digitally store items, scan all tax related documents and store these in labeled folders on your computer. Be sure to back up this documentation on an external hard drive.
Protect your tax documents. Be sure to store these folders, expanding file folders, envelopes or external hard drives in a fire-proof and water-proof locking box or file cabinet.
Retain your tax documents. You will most likely want to keep these documents safely stored for up to 7 years. Please check with your accountant for exactly how long you should retain your taxes and supporting materials.