Organize Your Tax Documents Like an Expert!

As we get closer and closer to the New Year, it’s about time we start looking at the year behind us.

Of course, we’re not talking about your resolutions or whether you watched too much TV! We may be serious tennis fans, and we could talk about the San Francisco 49ers all day long. But we’re a tax representation firm, and we know we’re better suited for giving you tips on filing your taxes than we are about starting a vegan diet.

With that in mind, we think it’s time we talk about your tax records.

The end of the year is the perfect time to start collecting your files and getting them ready for the New Year, because that’s when you’ll start receiving tax documents from your employer, your stockbroker, and basically everyone else in your financial life!

Beware: Tax Documents Are Coming!

Tax season will be here before you know it, and if you don’t have an organized system for your tax documents, receipts, and other financial documents, you’ll spend the months of March and April stressed out and overwhelmed. At worst, you could even miss the tax deadline or be audited by the IRS because you didn’t have all the documents to support a deduction you claimed!

You don’t want to deal with that, and we don’t want you to deal with that.

Whether you have legitimate tax issues upon filing your return, or whether you’re just stressed out and pulling an all-nighter trying to file your tax return by the deadline, Edge Financial believes you deserve a smooth tax-filing season.

We’re here to help, with an expert guide to organizing your tax documents! It’s a lot easier than you realize.

What are the different types of tax documents?

In most cases, “tax documents” is probably going to be used to refer to the documents you receive and file throughout tax season. Think W-2 or 1099-B. However, for the sake of this discussion, we’re going to open up the definition a bit to include any other document you may need when filing your taxes.

IRS Tax Documents

Depending on your employment and income situation, you’ll deal with a number of IRS forms and documents between January and April.

Most IRS tax documents will fall into one of two categories: the forms you receive from your employer (like the W-2), broker (like the 1099-B), or other institutions, and the forms you fill out when filing your taxes, like the 1040.

Business Files & Expenses

If it has to do with your business’s finances, there’s a good chance that it may have relevance when it’s time to file your taxes. Payroll documentation, your books, and any business expenses are certainly going to play a role in filing your business tax return. In fact, the omission of nearly any of these is likely to trigger an audit—simply because they’re such fundamental pieces of your business taxes.

Receipts

We’re all about receipts. They’re endlessly helpful to have on-hand when a tax issue with the IRS arises, but they’re also quite useful during the tax filing process. Receipts are a record; they detail your business expenses, shed light on your home renovations, and even just show proof of sales tax. Deployed just right, receipts are among the handiest tax documents out there.

Tax Credits and Tax Deductions

Why isn’t this rolled in with “receipts,” especially since there’s definite crossover between the two categories? Well, although many tax deductions require some receipts—such as educational expenses—other deductions and credits fall outside of this territory. As an example, the Additional Child Tax Credit requires different documentation, but it saves families millions of dollars on their taxes each year!

A Few Tips for Organizing Tax Documents

Knowing the types of tax documents is one thing, but getting them organized is another beast entirely.

1. Make a file for everything.

We know detailed organizational systems aren’t everyone’s cup of tea. Much like a new habit, it’ll take some time for you to get comfortable with your new organizational system for tax documents.

That’s why you don’t have to start big! Start with a file for each tax document type: a folder for receipts, a folder for every business-related expense or document, and a folder for the tax documents you receive from employers, stock brokers, and the like! You really don’t need some fancy system when you’re getting started; all you need is to know where you can find your tax documents when it’s time to file your tax return!

2. Organize throughout the year.

Have you ever searched frantically for your wallet just as you planned to leave? We have, and we know for a fact that it’s harder to find anything when you’re looking for it last minute.

This principle is equally true for your tax documents. Starting on January 1st, make a habit of regularly filing receipts, tax documents, and whatever else you think might come handy at tax time. If you’ve made a donation to a nonprofit like Goodwill, place that receipt in your “deductions” file. And if you regularly keep receipts for regular purchases, make a habit of placing them (and tallying them up) in a “receipts” file.

You’ll feel more on top of your finances, and you’ll have reduced clutter. No more last-minute searches at midnight on April 14th—what a relief!

3. Remember your digital tax documents.

Each and every year, more and more correspondence is handled online rather than snail mail. The same goes for your tax documents, and your organization needs to take that into account!

Certain companies provide paperless copies of income statements or health insurance coverage; you can even log in to most stock brokerage sites to access your tax documents. As a part of your organizational system, make a simple folder on your desktop (or in your email) where you can store those documents! Again, nothing fancy is required; you can label it “Tax Stuff” if you want, as long as you use it.

Organization: The Key to Tax Prep Success

Yes, there are serious tax issues that can arise when you aren’t organized. But even more simply than that, you deserve to have a headache-free tax season.

Now that you have a few tips for how to get started, it’s time to get to work. Take next year by stride and see how it helps! We’ve got a good feeling you’ll be less likely to procrastinate and you’ll be better prepared for your tax return. And that sounds like a successful tax season to us!

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