Top 7 Tax Record Keeping Tips

1. Old Documents

Before you go out and buy a huge safe to store your piles of financial documents, you might want to consider throwing some of them away. According to the IRS you will want to keep them for at least 3 years or up to 7, depending on your unique situation. There are some documents such as records on appreciable assets that you might want to keep for a few extra years. However, for the most part you should be fine discarding any documents more than 3 years old if you regularly file a return.

2. W-2s & 1099s

All income related tax documents should be kept somewhere safe. This includes any W-2s for jobs you have worked during the year, and 1099s from any independent contracting work and/or gambling winnings. All of these documents are considered “basic records” and should be kept for at least 3 years. If you have enough room, then you might even want to keep them a little longer just in case.

3. Receipts

As far as receipts go, too much is better than too little when it comes to storing your tax documents. If you are deducting any expenses, then you need to keep your proof. If you are having trouble organizing receipts of multiple different sizes, then you could always photo copy a few onto a single sheet of paper. This will make the documents easier to organize, and can save room as well.  

4. Tax Settlement Records

If you recently settled IRS back tax debts, then you will need to keep all of your records for at least a few years. That way, if there are ever any discrepancies in the future – such as a new tax lien or wage garnishment – then you will be prepared to get it resolved as soon as possible.

5. Real Estate Documents

If you own a house, then you have a whole set of additional documents you need to keep. If you bought a house this year then you will need to keep your closing statements, and title documents. You will also want to keep record of the interest you paid to your mortgage lender so that you can deduct those funds on your tax return.

6. Designate a Storage Spot

Throwing all of your documents into random drawers, or keeping them scattered around your home office is a disastrous idea. Tax documents need to be treated just like other important documents such as passports, birth certificates, etc. You should designate a specific storage spot for your tax records in a filing cabinet, or a safe, that you can easily access all year long. That way you can easily add documents to the file as you receive them, and will know where they are next tax season.

7. Organize

In addition to keeping your documents in a specific spot, it is also a good idea to keep them well organized. This will make it easier to find specific receipts or papers when you sit down to prepare your tax return.