Tax Time Organizing Tips
Posted Under Office Organization

tax time organizing tips

No matter how many times I speak on organizing paper, no matter how many articles are published on tax preparation, no matter how many experts there are on the topic, there are always people who ask, “How long should you keep papers?”


You might be shuffling your own papers just now, wondering if you are doing it right. Here are a few tips to ensure you’ve got your paper monster under control.


If you don’t run a business and you are a W-2 employee, meaning that you work for someone else, you probably don’t have to save much. Definitely keep your W-2′s, your end-of-year bank and investment statements, and receipts for charitable donations, along with your actual tax returns.


In general, the rule of thumb for simple financial situations like these is to save the past six years of tax records after taxes are filed, plus the current one. This comes from the IRS guidelines for audits, which you can read up on yourself.


If you have a complex investment picture, have chronic medical conditions with high expenses, have several children with education expenses, perform freelance services, or run a business, then your finances and record keeping requirements are greater than the average W-2 employee. You should ask your financial advisor to provide you with a list or records that you should be keeping throughout the year for tax purposes.


For these more complex situations, there may be a need to keep some records longer, especially in the case of business depreciation, investment fraud losses, lawsuits, and certain other conditions.


You don’t need to stress about having all of your records organized throughout the year. If you aren’t naturally an organized person, it’s ok to dump, pile, or throw all of your financial records into a single container during the year. The trick is making sure that you consistently do this, so all records that you need are in one spot when the time comes to prepare your taxes.


The other category or records that you should have separate from tax papers are what I call the Vital Records file. You can download from here a free list of everything that should be in your Vital Records file. You would want all of these documents handy if you ever had to re-create your life, say after a fire or flood.


What you store all of these records in isn’t nearly as important as having a system that you like. You can use file folders, envelopes, binders, shoe boxes, plastic bins, or whatever works for you. The key is to have your records labeled, accessible throughout the year, and safe from things like water and pests.


What types of paper and tax organizing do you want to know more about?


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