An Expert’s Guide to Organizing Your Tax Documents

As the clock ticks closer and closer to the New Year, it’s time to start looking back at the year (nearly) past.

We’re not talking about your habits, your hobbies, or your goals! We’re a tax resolution firm, so we’re experts in tax relief, IRS audit defense, and tax preparation—not instructing you how to start a vegan diet.

No, we’re talking about your tax records.

The end of the year is a great time to collect your outstanding files and get them ready for next year, when you’ll start receiving tax documents from your employer, stockbroker, and everyone else under the sun.

Tax (Documents) Season Is Coming

Before you know it, tax season will be here, and without a well-organized set of tax documents, receipts, and files, you leave yourself open to IRS issues that can haunt you for months—or years—to come. Do you really want to be audited because you couldn’t find all the right documents to support a deduction you claimed? Or do you want to miss the tax filing deadline altogether because you just couldn’t find the right paperwork in time?

Of course you don’t! Like everyone, you want a smooth tax-filing season—and you don’t want to have to call us to help you get out from under the IRS’s iron grip.

We want you to avoid potential IRS issues, too. That’s why we’re giving you an expert’s guide to organizing your tax documents. It’s a lot easier than you may think!

What Types of Tax Documents Are There?

Technically, the term “tax documents” is generally meant to refer to the tax documents you receive and file during tax season. Things like your W-2 or 1099-B.

But for the purposes of this topic, we’re going to open up the definition just a little bit. In this context, consider “tax document” to mean “any document you may need when filing your taxes.”

IRS Tax Documents

The most well known tax documents are understandably the ones designed by the IRS that guide the tax-filing process. Depending on your employment and income situation, you’ll deal with a number of these tax documents between January and Tax Day.

IRS tax documents come in two main flavors: the kind you receive and the kind you fill out. You receive documents like the W-2 from your employer, or a 1099-B from your broker. You’ll fill out forms like the 1040 when filing.

Receipts

It should come as no surprise that we’re big on receipts around here. After all, they can be endlessly helpful when you’re dealing with the IRS. However, they can be equally useful when you’re filing your taxes; they keep a record of your business expenses, receipts illustrating home renovations, and even just sales tax! Your receipts should be your first and most common type of tax document.

Business Files & Expenses

If it has to do with your business’s finances, there’s a good chance that it may have relevance when it’s time to file your taxes. Payroll documentation, your books, and any business expenses are certainly going to play a role in filing your business tax return. In fact, the omission of nearly any of these is likely to trigger an audit—simply because they’re such fundamental pieces of your business taxes.

Tax Deductions and Credits

We considered lumping this one in with “receipts,” because there’s certainly some crossover between the two. We decided against it. Although deductions may require some receipts—like certain educational expenses—some tax deductions and credits fall outside of “receipts” territory. For example, the Additional Child Tax Credit may require different documentation, but can save your growing family some serious money at tax time.

Tips for Organizing Your Tax Documents

Now that you have a sense of the type of tax documents you’ll need to file, you need a system to get them organized.

1. A File for Everything

We’re detail oriented around here, but we know it doesn’t come naturally to everyone. Much like any new habit, when you’re beginning a new organizational system, it may be best to start small. Begin with a file for each type of tax document: one folder for receipts, one folder for every tax document you receive at the beginning of the year, and one folder for every business-related expense or document. You don’t need some extravagant system to start; you just need to know where to find things when it’s time to file.

2. Organize Year-Round

Have you ever struggled to find your keys right when you need to be heading out the door? It’s hard to find just about anything when you’re looking for it last minute, including your tax documents. Now that you have a very simple setup for organizing your tax documents, it’s time to put it to use—starting on January 1st. If you keep your receipts for regular purchases, make a habit of placing them in your file at the end of each day. If you make a donation to Goodwill or a nonprofit, place the receipt in your “deductions” file.

Not only will you feel more on top of your finances year-round, but you’ll also have reduced some of the clutter that often leads folks to procrastinate on the tax filing process!

3. Don’t Forget Your Digital Tax Documents

We’re well into the digital age, which means you won’t receive every tax document via snail mail. Some companies offer paperless versions of your income statements, while you can also simply log in for access to tax documentation for your investments and even student loan payments. Don’t let digital tax documents fall by the wayside; create a simple folder on your computer or within your email where you can immediately move these documents! It doesn’t have to have a fancy label; even “tax stuff” will do the trick.

Organization Is Key to Tax Success

There are many roads that lead to tax debt, tax issues, and IRS audits—but there are usually easy ways to avoid them. While we can’t guarantee that organizing your tax documents will always steer you clear of tax problems, we can guarantee that it will help you out significantly in the long run.

You’ll feel more confident, you’ll be less likely to procrastinate, and you’ll be better prepared should you end up receiving a letter from the IRS. In our book, that’s what we consider a success.

If you have been contacted by the IRS, never fear—we’re here to help. Get in touch via our toll-free live chat to get started today.

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