It's that time of year again. The time when the IRS and the state ask you to report what you earned during the prior year. The following are tips that will help you know what documents to keep, where to keep them and for how long.
We are fortunate to have online access to most of our tax worthy documents freeing us up from drowning in paper. However, it is still good to keep some paper handy throughout the year for reference. Setting up a filing system to access receipts for major purchases, current monthly statements, home or auto repairs, medical costs and donations, to name a few, is often preferable. The process of online access needs to fit within your personal comfort zone.
Any paper that you choose to file can be neatly stored in plastic file boxes which are great for transporting to that post-filing permanent storage area. File cabinets and desks work well for more immediate access prior to filling out those tax forms. Keep in mind, that you don't have to file every receipt, utility bill or document that doesn't need to be reported to the government. Scanning documents to external hard drives is also a great way to save and eliminate paper.
When your taxes are done, store them away from your current files. Then destroy one year of stored taxes from the past. The IRS says you only need to retain 3 years back but there are exceptions. So, ask your CPA, the IRS or state to find out all the rules.
There are many options for maintaining your paperwork for tax preparation and after. Don't keep or file what the government says you don't need, keep what you feel comfortable keeping and store the rest.
Have fun shopping for files, labels and storage items that will work for you.
It's as simple as that!