Don’t let unorganized tax filing documents cost you money on your tax return this year! Via Shutterstock
The April 15th, tax filing deadline is quickly approaching. In the past it caused me so much stress, that on two occasions I’ve had to file a tax extension. Thankfully, the last few years have been different, after I finally put some organization into the process to make tax filing easier.
This year, preparation for our income taxes took me less than half as long as it used to. Here is an overview of how I organize our tax documents:
How to tame the paper chaos, get your documents organized, and simplify your tax filing for next year!
It doesn’t matter if you’re planning on doing your own taxes with FreeFile from the IRS, a software program like Turbo Tax, an online or in-person tax preparer like H&R Block, or an independent CPA keeping your tax filing paperwork organized is a must! You need documentation and proof of every deduction.
Organizing Physical Tax Filing Documents:
I use an accordion file to add tax information in throughout the year. Property tax receipts, mortgage interest statements, energy saving home improvement receipts, 1099′s, W2′s–everything I’ll need for tax filing, goes into the file immediately.
Write the date, what the purchase was for on receipts right after making a purchase, before tossing it into the file. Trust me, you won’t remember what you purchased in March, next year when you’re doing your taxes.
If you make property donations to Salvation Army, Goodwill, or any other authorized charities, make sure you get a receipt that itemizes what you’re donating. New for us this year, since we donated more than $500 worth of physical goods, we were asked when we acquired these purchases, how we acquired them (i.e. gift, inheritance, purchase, etc.), how much we paid for them and how we determined the value of the items (thrift store prices).
Organizing Digital Tax Filing Documents:
Set up a folder in your email for receipts of online purchases as well. I use a separate email addresses for my household and for business. All receipts are filtered into “Receipts” folders I can easily access. I used to print all the receipts, but to conserve space, I now save those receipts to a thumb drive each year which I store with our tax return for proof. You could use cloud based storage for this as well, but I like keeping it all together on the flash drive.
Organizing Tax Filing Documents for Self Employed:
So many of us have side hustles to help make ends meet. While we may be a rock-star when it comes to our passion, we are often clueless when it comes to having any tax filing finesse.
Having a separate bank account and credit card for your business is a must. Save your statements every month as they’re a great income and expense record. If you have a home office, keep track of your mortgage interest, taxes, utility bills, office improvements, insurance, etc. I keep all of this in an excel file.
If you’re deducting business related expenses you need to be fanatical about keeping detailed records. For example, if you take a client to dinner you need to log who you entertained, the date, the purpose of the meeting, the cost, and the mileage. If you’re using your car for business, a mileage log is required. A day planner works great for this. Receipts for any and every expense need to be saved, invoices should be matched to income, and every penny needs to be accounted for.
I like to use my Mint account to help me categorize expenses, tag items that are tax related, and log all the IRS’ required tax filing details. That way at the end of the year I can print off an excel file with all the information in it to give to the accountant. Keeping it in an excel file is another option if you prefer. 
Categorizing and tagging tax filing expenses for your business in Mint.
Check this list of options for saving money on your income tax by increasing your available deductions and don’t miss these 7 common overlooked tax deductions and credits.
The more organized and detailed you are with your paperwork the easier your income tax filing will go. Remember it’s not how much you make, it’s how much you keep…and as the sign in my accountant’s office says, “It’s YOUR money not THEIRS!”
How do you keep your tax filing documents organized?