For many of us, tax time can become very stressful especially if all our tax documents are not organized. And if you have someone doing your taxes, having them sift through a shoebox full of receipts can be time-consuming.
The longer it takes your tax preparer to go through your paperwork, the longer it will take them to get your returns prepared. So, let’s see if we can make this process easier for everyone.
Disclosure: Some of the links below are affiliate links that I have provided for your convenience. Click here to read my full disclosure policy.
Disclosure: I am not a certified public accountant. If you have questions that deal with taxes, please seek advice from a certified public accountant.
Quick Links to Info Below
Gathering Your Tax Documents
Small warning: If this is your first attempt at organizing your documents, this task may take a while to complete. But once you have this system in place, preparing your documents for the coming years should not take long at all. With that, let’s get started!
Everyone’s tax situation is very different. Some people have dependents and others may own businesses and have employees.
This means needing different tax documents for each situation. If your tax situation is not very complicated, then you just need a simple tax prep checklist. Click here for a list of tax documents you may need for this coming year.
If your taxes are more extensive, check in with your accountant and ask them for a list of forms and expenses that you need to save throughout the year.
You may be inadvertently throwing away receipts and invoices that your accountant needs in order to save you more money.
First, you will need an accordion file. If you have a business, then you will need two. And if you have multiple businesses, purchase one for each.
Next, label each accordion file as home (or personal), business, or you can name it after the business followed by the year.
(Optional) Because label tabs on accordion files are so small and I hate having to dig into each pocket for small receipts and paperwork, I create separate files and store them in each pocket.
So, for the next steps, you can either label the tabs of your accordion file or you can use separate files.
Personal Tax Documents and Files
In the photo below, I created files for all my tax documents, receipts, logs, and invoices. You may or may not have the same type of documents. So, go through your prep checklist and make a file for each.
Business Tax Documents and Files
Below is a photo of files for my business. Again, you may or may not need these same files. Create files for those tax documents, invoices, and other paperwork you may need to prepare your returns.
Receipts and Invoices
Now, let’s deal with your receipts and invoices. First, you want to gather all your receipts and begin separating each by type of expense category.
Use your files as a guide. If you do not have many categories or as many receipts, do not waste files. Instead, create one folder and name it “tax deductibles”.
Creating a Record for Your Tax Documents
If you have a software program already, like Quicken Books, then you can skip this part.
Now, before you stash your receipts in each of the folders or pockets, you should create a record for each receipt. You can do this by either using a spreadsheet program or using a simple notebook.
Below, you can click on the links to get a copy of my spreadsheet templates. In these templates, I provide examples of how I use it. You can adapt these spreadsheets by making a copy and then edit the sheets and columns to fit your tax situation.
This step may seem repetitive but it will save you and your accountant so much time when doing your taxes.
In the past, I had a hard time reading some of my receipts because they had faded pretty badly. I ended up tossing them out because I didn’t record them elsewhere. Thus, I lost out on that deduction.
As for your accountant, keeping a detailed and organized log will enable him/her to complete your returns very quickly. Just upload your log to a jump drive or email them your log. Done!
This brings me to another optional but cautious suggestion, taking photos of your receipts. But we will talk more about this later.
If you don’t have access to a spreadsheet program, then record your receipts in a notebook. Use a separate page for each type of expense and keep a running total. Make sure to include information like vendor, date of purchase, and amount.
I usually do not receive a ton of these so I just make one folder. However, if you have a lot, then create one for income-related forms like W2’s and 1099’s and the other for deductible-related documents such as 1098E’s (student interest paid), 5498’s (IRA contributions), and mileage logs.
Since 1997, the IRS allows scanned copies of receipts as proof of expense. Just make sure it is legible. So, if you’d like to just be able to chuck your receipts as soon as you record them, then there are a couple of things you can do.
One way is to take a photo of your receipt and store it in a file. But don’t forget to record this receipt in your spreadsheet doc or notebook. You can keep your files further organized by giving it a tracking ID. For example, you can name the photo of a medical receipt as MR_Jan102017. You can then include this tracking ID on your spreadsheet so that you can easily locate if you need it.
Caution: Remember to back these files onto an external source like a jumpdrive just in case your computer crashes.
3rd Party Tools for Tax Documents
Another option is to use an app. There are many receipt scanning apps that will not only take a photo of your receipt but will categorize them for you as well.
However, many of these apps are not free. So, if you feel you have a lot of receipts and not a lot of time to deal with them, then this option may be a better fit for you.
Here is a list of some apps, if you’d like to explore and see which will work for you.
Business Owners: As I said at the start, you can apply the above steps to your business or businesses just make sure to keep them all separate. You will most likely have more paperwork to deal with so take your time.
Once you’ve set up this system, you should find it much easier to keep up with all your paperwork for years to come.
Tips to Follow
- photograph all receipts as they become available
- record and store all receipts as soon as possible (don’t wait for a pile-up)
- take a photo of any qualified deductible mileage before and after a trip (keep a sticky note on your dashboard as a reminder to do so) then record as soon as possible
- depending on your situation, you may need to keep your tax records for 2-7 years (click here to read the IRS’ guidelines)
Ok, let’s get started on organizing your documents and get ready for tax time this year or next.
Know someone who could use this post? Use the share buttons above and below this post to help them out with their tax organization.
Need some additional help keeping track of your personal finances? Click here to check out our free budget/household finances planners. They come in regular and mini size pages.
Also, don’t forget to sign up for our weekly organizing challenges. Enter your name and email address below and you’ll receive a new challenge every week.
Want to save this for later? Pin the pic below to save it to your favorite Pinterest board.