Tips to Organize Your Tax Records

Storage Hints

Organize your records by tax year. At the start of each year create the current year’s files. Here are some filing suggestions.

• Tax return and support. Create a file with copies of your signed tax return(s) for the year. Include any support documents provided with your filed tax return.
• Files in tax return order. Create your annual files to match the flow of your 1040 tax return. Here are some suggestions.
  • Income. Copies of W-2s, 1099s, Social Security statements, interest income, K-1s, and investment activity go in this file.
  • Charitable Donations. Create a separate file for cash donations and one for non-cash donations. Include a copy of your charitable mileage log in this file.
  • Medical and Dental. Create a file for all your medical related expenses. Include a copy of your medical related mileage log in this file.
  • Other itemized deduction file. In this file include all other proof of itemized deductions. This includes tax statements, mortgage interest, state income tax documentation, casualty and theft loss information and unreimbursed business expenses.
  • Business activity. Have a file for each hobby and business activity. Include a copy of your business mileage log in this file.
  • Education. Create a file for all documents related to educational expenses. Include in it copies of invoices, tuition and fees. Include invoices for music lessons, instruments and any materials required to purchase for your student.
  • Other. Put all your miscellaneous receipts into this file. This includes receipts you are unsure about. Include receipts for daycare, educational expenses, dues, unreimbursed business expenses and any other tax related items.
• Statement file. Sort all your statements by vendor, then by month. Create a separate file for these statements. This can include bank statements, credit card statements, and investment account statements. Consider creating a digital back up copy of these statements and store them on a CD or USB drive.

The Digital Alternative

If more of your records are in digital format, consider creating a tax folder for each year on your computer and then place your digital records into sub-folders using the same sort as noted above. Create password protection for each folder.

Rotation idea

Finally, at the end of each tax year place a note on the tax return to confirm the date your tax return was sent into the federal and/or state government. Note on the outside of this file when you can toss the support documentation. Go back to old tax years and shred the old documents that are no longer needed. Do not take this action unless you know the length of time you will need to save these records.