Why wait until the last minute to do your taxes? Get a head start this year by organizing your documents and receipts early. Here’s a simple three-folder filing system from The Motley Fool® to get your paperwork in order and help make this tax season a little easier.
Folder #1 – income documents, such as:
- W-2s and 1099s
- Social Security statements (1099-SSA)
- Dividend statements (1099-DIV) and interest statements (1099-INT)
- Investment income
- Other sources, such as jury duty pay and alimony
Folder #2 – expenses and deductions, such as:
- Health care expenses
- Real estate property taxes and paid mortgage interest
- Charitable donations
- Motor vehicle registration fee
- Last year’s tax preparation fees
Folder #3 – investments, such as:
- Deductible or tax-deferred investments (Roth accounts)
- Nondeductible investments (IRAs)
- Taxable investments (stocks)
To create your filing system, label each folder with Avery File Folder Labels and free file folder templates so you can identify the right folder at a glance. Then, drop your documents and receipts inside the appropriate folder for quick and easy filing. If you’ve got a lot of paperwork to organize, add more folders and consider color coding your files by type using Avery File Folder Labels in Assorted Colors. For example, use green for income-related files, red for expenses and blue for investments.
Next, avoid the tax time crunch by setting up an appointment with your tax professional/accountant early. Soon, you’ll be well on your way to conquering another tax season.
Next month, find out how long you should keep important household records including tax returns—plus “must-have” tips to better recordkeeping!