Creating Files to Organize Tax Records

Throughout the year, you probably receive a lot of paperwork, some of which you should keep to prepare your tax return. And, you may need to keep other documents to substantiate prior-year tax reporting.

Maintaining your documents in an organized fashion will not only help you avoid missing valuable deductions, it will help ensure that your income tax return is complete and accurate. If not, you can be out a lot of money in penalties and interest when errors are discovered.

Worksheet outlines files and contents

Use this worksheet, which outlines ten main file folders you can create to keep your tax information organized and accessible, whether you keep digital or hard copies. The folders are: bank accounts; brokerage accounts; canceled checks; credit card statements; income; investments; receipts; retirement plans; tax return 20__; and tax info.

The worksheet also explains the types of materials to keep in each folder, and how long you should keep them.

These files should be incorporated into your general household filing or record-keeping system. When tax time rolls around, all you have to do is pull out or look at these files, and you’re ready to prepare your tax return.

If you pay bills online, print a confirmation statement and retain it in lieu of a canceled check.

Maintaining efficiently organized and complete personal finance records helps you in so many ways. Not only can you avoid wasting time or stressing out when you can’t find important documents, but you can also avoid wasting money in late payment fees and additional interest charges, not to mention how much better you will feel should you get one of those wonderful audit notices in the mail from the IRS.