Organize your tax documents in 3 simple steps

Happy Tax Tax Industry

With snow on the ground and frigid temperatures throughout the USA, it may feel like springtime is merely a distant dream. Not to worry. The big thaw is on the way, and with the change of seasons comes that time of year we at Happy Tax love most (and you can, too): tax season.

Don’t let tax season sneak up on you and leave you scrambling at the last minute! While you’re snuggling in front of the fire this weekend, take a few minutes to get yourself organized. Then when it’s time to present your professional CPA with your documents, you’ll be breathing easy, because it will all be right at your fingertips.

Step 1

Your first major sort should be into business and personal documents, with a separate bin for each. If you have multiple businesses, you should allot one bin for each business.

Step 2

Within your business and personal bins, set up 3 major files. One for official government documents and forms, one for receipts, and one for other financial documents (e.g., statements from your bank, statements from your stock broker).

  • File one: Official tax documents and other governmental communications

In this basket, include official tax documents or forms such as your W-2 from work or your 1099 from the bank. In this folder, you should also store copies of your completed taxes from the past few years for easy reference.

  • File two: Receipts

Store all relevant receipts in this basket. If you have them all, your tax preparer may be able to take advantage of new tax laws that allow a deduction this year that wasn’t available last year. So don’t get caught up in the guessing game. If it’s a receipt, put it in the basket.

Within this folder, you may want to sort into two broad categories: those you are almost certain are deductible, and those about which you’re unclear. This will save you or your tax preparer time when you begin the process of completing your tax forms.

  • File three: Other financial paperwork

In this basket, place financial paperwork from your bank, stock broker, or other financial institutions.

Step 3

You’re nearly done! After you’ve sorted your collection of documents and receipts into business and personal bins and sub-sorted into the three files explained above, it’s time for one more sort. After highlighting the date and other crucial info on each document (e.g., totals), arrange them by date starting with the most recent on top.

And that’s all there is to it. By employing the above three simple steps, you and your tax preparer will be sitting pretty when tax season dawns in just a few short weeks.