Tax season is here and it may be causing you agita. Rifling through drawers for your 2016 tax paperwork; sorting a flood of receipts to qualify for write-offs; printing out assorted bank, brokerage and mutual fund statements and on and on.
Don’t hide under the covers. Instead, follow these five organization strategies from tax advisers to get your taxes together once and for all:
1. Find the Perfect Spot
This may be the most important step in getting more organized. Instead of throwing receipts onto the nearest countertop, only to be stowed in the junk drawer when company comes, why not designate a place for your tax paperwork to live?
Do you really need savings accounts at three banks? Consolidate and simplify to make the years ahead that much easier.
— Michael L. Thompson, Copper Leaf Financial
The key is to make it a spot that is just as convenient as the countertop.
Do you normally pay bills at the dining room table? Perhaps the dining room buffet is the best place for your paperwork. Do you empty your pockets of store receipts and place them on the nightstand? A dedicated table at the end of the hall could hold a filing system. Find a centrally located spot you pass by more than once during your day and start a habit of depositing the paperwork there.
2. Divide and Conquer
Separate various types of tax-related documents for easy retrieval later. Look for file organizers at an office supply store or create a system of your own using folders or binders you have. Dedicate a file to each type of receipt and clearly label it. Some examples:
- Mortgage statements
- Bank and investment account statements
- Property tax payments
- Insurance payments
- Income-tax and estimated-tax payments
- Auto loan payments
- Credit card statements (identify any tax-deductible charges)
- Student loan payments
- Business-related association fees
- Income and check stubs
- Charitable donations
- Medical bills and receipts
- Home-office related receipts, if you have a home office
3. Consolidate Your Finances
You can overcome some of the chaos with “financial decluttering,” says Michael L. Thompson, wealth advisor and partner at Copper Leaf Financial in Williston, Vt.
“Begin by simplifying your overall financial life as much as possible,” advises Thompson. “Consolidate all those old IRA accounts. Do you really need savings accounts at three banks? What about those old savings bonds in your safe deposit box? Consolidate and simplify to make the years ahead that much easier.”
4. Consider Electronic Storage
Instead of collecting store receipts, scan and store the images electronically. Make a notation on each receipt about the deduction purpose and then scan the receipt to a dedicated flash drive or other storage method.
Or take a smartphone picture of the receipt; you might even want an app to help track your expenses. MoneyTalksNews recently published a piece online on some of the best apps for this.
Just remember to keep backup copies of your receipts. In case of an audit, the IRS can request these documents going back as much as many as six years.
5. Stow Some Documents Separately
Find a special place for key documents you need to preserve, but don’t have to deal with regularly. Things like: your birth certificate; Social Security card; marriage and divorce decree; military discharge documents; real estate deeds; insurance policies; beneficiary designations and wills and trusts.
Keep any certified documents in labeled envelopes and together in a fire-safe security lockbox at home, says Howard Atlas, an elder law attorney and principal of the Atlas Law Group in New York. Make sure your spouse or significant other, children, attorney and perhaps even your accountant knows where they are and how to get them.