5 Tips to Organize Your Tax Records
Money Girl helps you maintain your tax files so that you never waste time searching for documents – or get caught unprepared by the IRS.
Laura Adams, MBA
Now that you filed a tax return (you did file, right?), you may be wondering what to do with it. It’s important to keep your tax records organized so you never waste time searching for documents—or get caught unprepared if the IRS taps you on the shoulder for an audit.
Here are 5 tips to maintain your tax files the right way:
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Keep tax returns for at least 7 years. You generally have up to 3 years to file an amended tax return or to be chosen for an audit. However, you can claim a loss for certain investments for up to 7 years. Additionally, the IRS says that if they suspect fraud, there is no statute of limitations for how far back they can audit you.
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Gather supporting documents. Keep every record that supports the income, deductions, or credits on your tax return—such as bills, credit card receipts, account statements, or mileage logs. Attach physical documents to a paper return or scan everything and keep a digital tax file. The IRS is okay with either method as long as you back up digital files in multiples places!
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Safeguard each tax return. If you keep paper records, put everything for each tax year in a separate clasp envelope and label it clearly. Put the envelope in a safe place, like a file drawer that locks, a fireproof safe, or a bank’s safe deposit box.
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Separate certain documents. Some documents should be kept indefinitely—such as closing documents on a home, investment transactions, retirement documents, and records related to insurance claims. So create duplicates for your paper tax returns and keep the originals in separate files so they’re never destroyed.
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Go digital over time. Each year you add another paper tax return to your files, go digital by scanning the oldest file in your records and shredding it. That’s a great way to keep decades of old records without your office looking like an episode on the Hoarders TV show.
Taxes photo from Shutterstock
About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.