Did you know your tax returns can help you save time completing your returns next year? Barring major life changes such as a new addition to the family or purchase or sale of a house, the information required for tax preparation should not change significantly from year to year. That’s why it’s a good idea to keep your tax returns and related records handy in a recordkeeping system for easy reference. Read on to find more tips on how you can keep your tax information organized.
The best time to create a tax recordkeeping system…
… is right after you’ve filed your taxes. Before your tax documents gets shuffled away, separated or lost, find a place such as a binder to hold all your paperwork for safekeeping and easy access.
A quick way to organize your tax records…
… is by year, using Avery Binders and free templates. You can designate a binder for each year, and create a spine for each binder that shows the year, such as “2009 Taxes.”
To make it easier to find detailed information…
… create sections in your binder to separate the different types of documents inside. Durable Avery Index Maker® Clear Label Dividers make it easy to create customized tabbed dividers such as “federal returns,” “state returns” (if applicable), “income,” “real estate,” “donations,” “investments,” or whatever types of documents you’ve included to support your tax return.
You should keep copies of your filed tax returns…
… indefinitely. Supporting tax records such as records of income or deduction expense should be kept for at least three years or until the period of limitations for that return runs out (which depends upon your circumstances). Note: Check with the IRS or contact your tax professional before throwing out any of your tax records.
The general recordkeeping rule of thumb is…
… when in doubt, don’t throw it out.
After you’ve created your tax records binder, don’t stop there. Consider all your important household records that should be kept indefinitely or for the duration of ownership and create a recordkeeping binder for each. For example, you may want to create a real estate binder to hold all your property documents and home improvements costs, and another for your investments and brokerage statements. You’re on an organization roll, so keep going!
Next month, find out how you can put money back in your pocket with charitable tax donation tips.