Organizing for Tax Season

Knowing how to organize for tax season can save time, reduce stress, and help ensure you don’t miss important documents or deductions. With income statements, 1099s, and other tax forms arriving in the early months of the year, preparation is key. Taking a proactive approach before paperwork starts piling up makes the filing process smoother and more efficient.

How to Organize for Tax Season Before Documents Arrive

In January, most of the papers you need to document the income, interest, and withheld taxes you report on your tax return will arrive in your mailbox, with investment-related 1099s often coming in February. Get ready for their arrival by creating print and online folders. It’s a good idea to create a paper and an email tax folder for messages relating directly to tax information. Since so much will come to you electronically, it make sense to replace physical filing cabinets with online folders.

Go Paperless and Create a Digital Tax Filing System

For the few items still coming through the mail, it may make sense to scan them in or see if a digital copy is readily available online. For example, the postal service may deliver your W-2s to your physical mailbox, but many companies post them on a secure site for downloading. Mortgage providers, banks, and other financial institutions often post important 1099 forms to your online account. Keep an eye on your inbox for email announcements that documents are available.

Paperless banking has replaced shoeboxes full of receipts with online statements that often provide key documentation for potential deductions, such as:

• charitable donations
• outlays for health care
• gambling winnings and losses
• property tax expenditures

Track Tax Information Throughout the Year

Many of us ignore the line items on these statements until we start our annual tax-filing ritual. However, you may save time by taking a few extra minutes each month to jot down tax-related information, like:

• expense title
• check numbers
• payee names
• dollar amounts
• dates

Create a spreadsheet dedicated to tax records. Throughout the year, consider downloading and printing online documents that will be available for only a limited time.

Essential Documents Needed for Tax Filing

Keep track of everything! Here are some of the documents you should have handy:

• Documents related to life events: marriage, death of a spouse or divorce, deductible alimony payment records, adoption papers, and child custody agreements should all be saved.
• Paperwork related to childbirth. You’ll want the newborn’s Social Security card, childcare receipts, and details on college savings plans.
• Home ownership information. Keep such paperwork as closing documents; it’s good to keep closing documents in case you paid real estate taxes or points when you closed that don’t appear on your year-end mortgage interest statement. Also save annual mortgage statements.

Additional Records to Keep for Tax Season

You will likely also need the following:

• Last year’s taxes, both federal and state. These are handy as good refreshers of what you filed and documents you’ll need.
• Retirement account contributions. Keep track of your contributions to a traditional IRA or a self-employed retirement account. Keep this information handy for tax time. The firms managing these accounts probably have all the information online.
• Education expenses. Documents help substantiate deduction claim.
• State and local taxes. Save these documents so they can be easily retrieved.
• Documents relating to a deceased relative. If, for example, a parent died during the year, you may be both an heir and executor. You will have to file their final return and keep track of funds and property you inherited.

How Long Should You Keep Tax Returns and Supporting Documents?

The value of a tax return doesn’t end on April 15. You’ll need to provide this document to get a mortgage, apply for student loans, and check the status of your refund. Generally, the IRS can audit you for three years after a filing date, and in some cases, even longer. Hold on to your return copies and supporting documents just in case.

If you’re unsure which tax returns or supporting documents you should retain — or how long to keep them — the professionals at Siepert & Co., LLP can help you create a recordkeeping strategy that protects you in the event of an audit and supports your long-term financial goals. Contact us with any questions about your tax documentation.