To round out the list I started the other day, here are a few more tips to help you with organizing your tax documents:
- Keep your pay stubs until you have your W-2. You can toss them after that-be sure to shred them!
- Every year go through your household bills and shred the ones that have been paid. Keep any receipts that you might have for large purchases. You may need them for insurance purposes
- Keep your bank statements for one year then shred them. Keep any canceled checks that are related to home improvements, taxes, business expenses or your mortgage
If your tax files aren’t organized, these tips will get you started. Ideally, you want to set things up so that your documents are organized during the course of the year and all you have to do is go to them to file your taxes every year. If you’re smart you’ll set up files for items mentioned in the tips from the previous post and this one. Set up files for your bank statements and canceled checks, pay stubs, medical and other expenses that may be tax deductible, household bills, receipts for home improvement expenses and large purchases. Of course, you also want to set up files for other documents that you have to keep. Check with your tax preparer or accountant to see what else is necessary.
Once you have your files set up, you can file your documents as soon as you you receive them during the course of the year. That is a new habit that you’ll have to develop so that your documents don’t end up in the usual shoe box or other inappropriate spot you’ve been using. Get into the habit of filing your receipts as soon as you bring them home or put them into a tray on your desk to file once a week. If you prefer, you can record your information into an electronic document or software that will total everything for the entire year. File statements once they’ve been reviewed or reconciled. When it comes time to review receipts or toss the pay stubs, you’ll have them all in one spot instead of having to look for them.
When tax season rolls around you won’t be scrambling to find every thing that you need. You’ll be able to go to the files that you’ve set up and pull them to prepare your return or to take them to your tax preparer. Toward the end of each year, create new files for the upcoming year so that you can trasition smoothly into filing your documents for the new year instead of having them lay around waiting on that task to be completed. This streamlines your monthly and annual processes and saves you a lot of time in the long run.