Keep reading for our best organization insight and ways you can get all your paperwork you need to file taxes in order.
If You File Personal Taxes
Gather Your Personal Documents and Paperwork
The very first step is to find all the necessary paperwork that you’ll need for filing your taxes. It might seem like you’re delaying the process, but having all of your documentation ready to go will help the tax filing process move more smoothly. It’ll reduce the likelihood of errors because you won’t have to stop frequently to look for paperwork.
What kind of paperwork do you need? It varies from family to family, but here’s a checklist that covers most personal tax situations.
- Income Forms: This includes your W-2, 1099 forms, and any other forms that report income. Don’t forget interest income and dividend income forms that you might have, too.
- Mortgage Forms: Property tax information, mortgage insurance details, and your Form 1098 (mortgage interest).
- Charitable Contributions: Donation receipts from charities, contribution statements, and cancelled checks or other financial records that show donations you made throughout the year.
- Deductions: Student loan interest (Form 1098-E) is deductible, as is some college tuition and fees.
- Medical Bills: Deductible if they exceed 10 percent of your income.
- Retirement Forms: Contributions to your retirement accounts.
- Receipts: Unreimbursed business expenses and other tax deductible items (like energy-efficient home improvements) are documented by your original purchase receipts.
Get All Your Paperwork Organized: Create a Filing System
Having your documents is a good start, but you can really streamline the process when you prioritize organization. “Purchase a few manila folders, an accordion file, or a filing system that will hold your tax documents,” recommends DaveRamsey.com. “In one folder, put all paperwork dealing with income—W-2s, 1099s and investment interest statements. In another folder, file paperwork for your deductions such as mortgage interest, property taxes, charitable giving and student loan interest. Create a third folder to file receipts for deductions that aren’t in the form of statements, such as medical and home improvement expenses.”
When It’s Time to File
Your documents are organized, so the actual process of filing your taxes should be easy. There are software programs like Turbo Tax that walk you through a series of questions that you answer so you can file your taxes yourself. If you’re not comfortable with that option, you can hire an accountant to file your taxes for you.
If your annual income is below $62,000, you qualify to use the Free File software from the IRS. “Free File is just one of the many services available through IRS.gov to help people with their taxes,” says IRS Commissioner John Koskinen. “Additional services include Where’s My Refund for timely updates on refunds, YouTube videos with quick tax tips, and many other ways of getting information. We encourage taxpayers to explore IRS.gov as tax season approaches.”
If You File Business Taxes
Gather the Necessary Business Documents
Staying organized is important when you’re working on your personal taxes, but it’s equally (if not more) important when you’re dealing with business paperwork.
- Accounting Records: This includes income tax returns, income tax withholdings, financial statements, general ledgers, payroll tax returns, expense reports, records for accounts payable and receivables, bank deposits, and cash/charge slips.
- Corporate Records: Common corporate records include property appraisals, plans and blueprints, internal audit records, and fixed asset reports.
- Human Resources and Payroll: Personnel records, payroll checks, medical benefits, employee attendance records, payroll information, Worker’s Compensation benefits, and employee W-2 forms should be stored appropriately.
- Cancelled Checks: Cancelled checks and other financial documents should be stored appropriately. Checks without tax information should be stored with the business financials; checks pertaining to tax documentation should be stored with that year’s tax files.
- Bank Account and Credit Card Statements: Business financial information should be stored securely, whether it’s supporting documents for tax purposes or not. The best way to stay organized when it comes to business financials is to separate tax documentation from other financial information so you can access the files you need whenever you need them.
Take Advantage of Off-Site Storage
Laws at both the state and federal levels require you to keep your business paperwork for anywhere from four to seven years, depending on the type of paperwork it is. Many accountants recommend you keep all of your business documents for seven years so you always ensure you have the papers you need.
Storing this much paperwork for several years can take up a lot of space that you might not have available in your current office. A secure solution is an off-site storage facility. You could take advantage of data storage, but that can be expensive. Another option is to store your business files in a self-storage unit.
Consider Alternative Shelving Options
When you use a self-storage unit to house your business documents, keep the files you access the most in the front of the unit so you can get to them quickly. When you’re housing several years of files, it can be easy to lose track.
An investment in high-end shelves can help you store your files more efficiently than a traditional file cabinet. “Vertical and lateral file cabinets both require committing aisle space for open drawers so users can access the contents of the cabinets,” according to SMEAD. “Open shelf file cabinets are completely accessible without requiring floor space for pulling out drawers.”
A traditional four-drawer lateral file cabinet holds 8,448 file folders. A six-tier open file shelving unit holds 80 percent more – 15,232 file folders. You can upgrade even more to a compacting file shelving system, and then you can store 405 percent more when compared to a filing cabinet. If over the years you could accumulate 35,000 file folders, this shelving system is a good bet for you.
Digitize Your Records
Whether you’re dealing with your personal records or your business tax files, many people believe that digitizing your records is a great way to streamline the tax filing process. It’s similar to putting your paperwork in a shoebox, but the “shoebox” is a group of files on your computer.
If you decide you want to start storing your tax documentation digitally, start transitioning all of your files, not just some of them. This will help you create an organized system moving forward; you can always digitize old files if you have the extra time or resources.
One recommendation is to go digital and go whole-hog, writes 1040.com. “While many of your current documents are available electronically, what about the archived paper that you’d like to keep? Scan them and create either PDF (Portable Document Format) or JPEG images. Single-sheet flatbed scanners have become very affordable. Just about any big-box retail store that offers electronic or computer items could carry them. As you scan you can create folders on your hard drive for the various categories you might need: Income, Deductions, Medical and so on. That will speed up finding the right documents later.”
When it comes to your taxes, the way you organize and store your records can help you file your paperwork with ease. Whether you’re dealing with personal documents or business files, you can take control of your finances and enjoy a stress-free tax season this year and every year.