FAQ: How to Organize Your Tax Records

Lots of people feel stressed during tax season—especially if they feel like they’re not organized. For this blog, we wanted to highlight several tips you can use to organize your tax records.

Make sure your documents are easily accessible

If you haven’t already, establish a set place to store your tax documents. For example, whereas a desk drawer, bookshelf, or file folder is good, a box that’s located in the back right hand corner of the top shelf in your closet is not. If your storage space isn’t easily accessible, it’s likely you won’t use it. Add items to your storage space as you receive them. Why? Because when receipts, W2s and 1099 forms are left on the kitchen counter, they’re more likely to get lost.

Categorize your documents

As you start to collect documents, be sure to split them into categories. Common categories may include earnings statements, deductions, and documents that may support tax credits. Sorting your documents on the front end (namely, as you receive them), will save you tons of time on the back end (i.e., you won’t need to scramble to sort them the night before your tax appointment).

Create a spreadsheet

Holding onto supporting documents (such as receipts, medical bills, healthcare premium payments and charitable contributions forms, among others) is good, but creating a spreadsheet is better.  Spreadsheet documentation is invaluable if you plan on filing a Schedule C. Why? Because it lists all of your deductions, business expenses, and write offs in one place. However— having a spreadsheet does not mean you can toss your supporting documentation. You’ll need to hold onto that in case you get audited. Experts agree that supporting documents should be kept for 7 years.

Final thoughts

If you sort and organize your tax documents throughout the year, as you receive them, this will save you a lot of stress and aggravation during tax season.  Not only can this help you stay on top of your deductions, it can help ensure the accuracy of your tax return.

For more information on how to sort and store your tax records, or for more information about the benefits of keeping your tax documents organized throughout the year, we can help. Call Hughes, Snell and Co., P.A., today to speak with an expert. Or, if you’d like more information about scheduling a tax preparation appointment, or you have questions about how virtual tax preparation appointments work, call our office today to get started.