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How to Organize Your Tax Documents

Tax season is approaching and when it comes to your tax documents, it helps to be organized. This will save you time and energy when it comes time to file. If the IRS needs extra information from you, having organized docs will be a lifesaver. Luckily, organizing your tax documents shouldn’t be too difficult. Below is a list of tips that will help you whip your file system into shape. Use file folders, labels, highlighter, and any other material you may need in order to do some serious administrative work.

Create Different Folders for Income and Deductions

The two broadest categories when it comes to your taxes are incomes and deductions. Income forms such as W-2, Earnings and Dividend Statements, 1099s, and Investments, will go in one pile and deductions (Medical Receipts, Energy Saving, Charitable Giving, etc.) will go in another. But don’t get too comfy yet—within each of those two broad categories are subsections that should be divided for extra clarity.

Investments

If you make investments, which, according to Gallup, 54% of us do, divide them up in terms of time. Monthly, quarterly, and yearly investment statements should all be separated. You don’t want to have to sift through every paper looking for something that could be found by looking in one of three neatly divided categories. Organize the statements chronologically within those time periods as well.

Job-Related Expenses

Another subcategory that should be divided is job-related expenses. Non-reimbursed business, job-related, and job-search related should all be separated based on their category, as each pertain to a different form of expense.

Mileage

This is where a pen, spiral notebook, and highlighter will come in handy. So many people don’t deduct their mileage and end up missing out on some money that they could get back. Non-reimbursed miles for business reasons, medical or moving miles, and charity miles (miles you’ve driven for registered charitable organizations), are all deductible. Keep a notebook in your car for miles that fall into these categories. Make a habit of marking the date, trip purpose, miles driven, and odometer readings for these miles, as they can be deducted at the end of the year. For more information, check the IRS website for current mileage rates.

Chronology

As aforementioned, the chronology is an important part of tax document organization. Sort your tax documents in the order in which you received them—most recent to latest (or vice versa, whichever works for you). Keep color-coded tabs for each month so that you know the date received and can have a frame of reference when searching for a specific document or receipt.

Keep Copies  

One of the most important items on this list, keeping a copy of your tax return, regardless of whether you file it yourself or not, will serve as a handy reference. Keep it in a place that is easy to locate. Or you can you store them in an online storage organizer, such as Lucion’s FileCenter.

Make this a Repetitive Process

Make these organizational steps repetitive. Do them every year and keep up your tax document organization throughout the year. Don’t want until the day before the filing deadline to start getting the documents into their right places. Maintenance of your filing system will serve you well in the event of an audit or any other IRS-related problem. Both you and the government will appreciate getting any issues resolved quickly and thoroughly.

Tax season and filing paperwork don’t have to be a drag. If you don’t want to be buried under documents and tax forms, do your organization yourself and watch it pay off later. Even if someone else is filing for you, it still helps to maintain organization throughout the year.

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