Organizing tax documents can save time and energy at very stressful time of year. Organizing these papers seem really important and on our minds… from Jan 1 until April 15th that is. The other 8-1/2 months of the year, we tend to let it slide. Let’s look at a few ways to make storage and organizing tax documents simple…all year long.
Tax Documents should be stored in one of two locations…ACTIVE or ARCHIVED…
ACTIVE FILES are receipts and documents that support the upcoming tax preparation.
THROUGH OUT THE YEAR you will acquire medical care receipts, charitable contributions and other receipts that you need to support your upcoming tax preparation. Create ONE HOME for ALL of these receipts. Put some thought into the location and type of this location. If it has a top that needs to be removed or in a remote location, you will not use it. One of my favorite types of container for saving tax receipts is this landscape paper drawer from the Container Store. It is $14.99 and can be stacked in multiple quantities so personal receipts can be separated from business receipts. The benefits of this type of container is that it EASILY sits on a shelf. It EASILY opens for a quick use. It EASILY holds 8-1/2″ x 11″ documents flat…EASY PEASY. More decorative types are also available.
ARCHIVED FILES have already by completed and filed. Do not store them at your desk or in prime real estate location. This is one of those items that can be stored in a remote location. Its HOME can on a dead end street!
BUT WHAT TO KEEP and HOW LONG?
Chances are you have heard of the seven year rule saying you must save your tax returns and back up information for 7 years. HOWEVER that does NOT mean 7 year from the current date…rather it means…
SAVE THE 7 PAST COMPLETED TAX RETURNS
Here is an example…
WRONG: It is February 2013. You think you must save 7 years indicating you can discard earlier than 2006
CORRECT: It is February 2013. You must save 7 years of prepared tax documents. This would include beginning from most recent: as follows indicating you can discard beginning in 2004
- 2011
- 2010
- 2009
- 2008
- 2007
- 2006
- 2005
Remember, you must not only save the tax return but also the receipts and documents that back up the information on the tax return
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