Organizing Tax Documents

Here is an obvious statement: The U.S. tax code is complicated.

Many people don’t mind paying their share of taxes, but the complexity of our tax system causes a multitude of problems.

Federal estimates put the collective time spent on taxes at 6.08 billion hours in 2020. That is a lot of time to do taxes. Here is a system to give you ideas to simplify your taxes.

Organize Taxes

Start organizing tax files and a file folder labeled with the tax year. As the year progresses, place every document in it that may be tax-related. That includes charitable contributions, business receipts, expenses, child care, tax forms, copies of individual retirement account (IRA) contributions, etc.

Anything and everything but, especially those that may be tax-deductible goes into this folder.

Documents Organizer Ideas

Maintain business and personal expenses separately. Place them in different folders or envelopes to keep everything in one place, so you don’t have to search when tax season rolls around. We suggest using Intuit QuickBooks Online to further organize your business income and expenditures.

Best Way to File Documents

Scan copies of tax paperwork for ease of use. This tactic becomes valuable if you are ever audited. Ideally, maintain both digital and paper copies. Digital copies are easiest to send to your accountant or the IRS if necessary but, having the hard copies is useful as a backup if your digital copy is ever lost. Remember without proper documentation, you are generally not allowed a tax deduction even if you incurred the legitimate expense.

There are a lot of options to scan documents. Many printers have a scanning function, photographing documents can work, or you can stop by UPS or Kinkos. The notes app on the iPhone has a scanning function. You will need to find a scanning app if you use an android phone.

Use a Tax Organizer Checklist 

Checklists help keep you organize everything you need and make it, so you don’t have to really think about it. Just run down the list until it’s complete. We have checklists for different situations for your convenience here:  https://docs.google.com/spreadsheets/d/1-hpflgIRxT7b_JIg3LQrToax1_S1iwfR/edit?usp=sharing&ouid=116446416370685270656&rtpof=true&sd=true

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