Tax Document Organization: A Simple Guide for Easier Filing

Tax season is officially upon us. By now, you have probably already begun receiving your W-2s, 1099’s or other tax documents in the mail. That means there is no better time to get started with your organization to make filing your taxes a little easier this year.

I’m going to walk you through the process my wife and I use to organize our tax documents for tax season. This is actually a year-round process that involves very little upkeep – just a couple manila envelopes stored in a safe location and a digital filing system that takes a few minutes each month.

 

How to Organize Your Tax Paperwork

Taxes are one of my least favorite things to do. I don’t mind paying taxes and supporting public works – I just don’t like filling out the paperwork. One of the most important things you can do to make preparing your taxes easier is to keep your papers organized.

Whether you do your taxes yourself or hire an accountant, keeping your documents organized will reduce errors and the time needed to complete your taxes (essential if you hire someone!).

I recommend trying to keep everything in one place, such as a binder, folder, large manila envelope, file folder, or tray on your desk, depending on your needs. Because I have a business, I keep my individual and business tax paperwork separate, even though it eventually all goes on the same tax return.

Use Software to help!

Many people use Quicken, Mint.com or other free software to help them organize their personal taxes.

QuickBooks

For my business, I use QuickBooks Online, which helps me track all income and expenses, and makes it easy to send a file to my accountant. I also use the envelope system described below to keep all the paper copies necessary for filing.

Get started with Quickbooks>>

Personal Capital

If you are a business without a lot of needs you can look at a fee option like Personal Capital. They can help you track expenses and income very easily and sync all your accounts, including investments, in once place. I use this platform for my personal finances and investing.

Get started with Personal Capital>>

If you are used to any of the top money management apps then most will do a good job of helping you keep track of your tax documents.

Organize Your Tax Documents Year Round

Our individual taxes are fairly simple, and we receive a few tax documents throughout the year. The most common tax documents we receive are receipts from charitable donations, which we keep in a manila envelope labeled “Tax Deductions.”

We use an inexpensive pocket folder to organize the rest of our tax documents once our W-2’s, 1099’s, and other tax documents start rolling in near the end of January. I place all income on one side of the folder, and all deductions and expenses on the other side of the folder.

My business taxes are a little more complicated as there are more expenses, deductions, receipts, and other papers to track. I receive business documents year round and file them as I receive them. Each time I receive a new document I file it into a simple manila envelope, where it will remain until tax time.

I find it easy to keep my business tax documents and papers in three folders – income, expenses, and business/tax documents. Keeping everything in separate envelopes makes it quick and easy for me to verify income if I don’t receive a 1099 form, itemize expenses, or find a receipt or other document if it is needed.

Based on your situation, you may find it easier to use fewer or more folders or envelopes, or just drop everything into a box until tax time and sort it out then.

Tax Preparation Checklist

Before you sit down to do your taxes, make sure you have everything you need. This will include (but is not limited to):

• Your Social Security Number, and the SSNs of those on your tax forms
• Bank account and routing numbers if you pay electronically
• Your EFTPS information if you file electronically
• List of previously paid taxes: self-employment tax, estimated taxes, property taxes, etc.
• W-2s, 1099’s, 1098’s and related tax documents.
• Interest paid on a mortgage or student loans
• Charitable donation receipts
• Contributions to tax-deferred retirement accounts (401k, IRA, self-employed retirement accounts).
• Homebuyer tax credits
• child care and education costs
• Medical costs and receipts (if you can deduct them)
• Other related documents

Printable tax preparation document. This is just a partial list. For a printable Tax Preparation Checklist, please check out the TurboTax – Tax Preparation Checklist.

When in Doubt – Seek Professional Tax Advice

I have had no problems using tax preparation software in the past – TurboTax and H&R Block @ Home are great options (H&R Block review). But you may run into a tax situation that isn’t clear.

I would rather err on the side of caution when it comes to the IRS and avoid paying late fees or penalties, especially now that my small business complicates my tax situation. Don’t hesitate to reach out to a tax professional if your tax situation is unclear.