Organizing your tax documents is an ongoing process. First, you have to do something with each document when you receive it, whether it’s a receipt for a business expense or a W-2 form from an employer. You might scan it. You might file it into a folder. Whatever you do with it, you need to refer to it again when you do your taxes, so you have to be able to locate it. You may also have to hand over some of these documents to someone else at some point, perhaps an accountant, but at the very least, to the IRS by the tax deadline. Eventually, you’ll want to dispose of your documents properly to protect your privacy.
If you break down the entire process in order to anticipate how you’ll use and refer to tax documents at a later date, you can come up with a method for scanning, saving, and eventually shredding files, so that you don’t inadvertently make more work for yourself along the way.
What Tax Documents Should You Save?
You should save everything mailed to you from employers, as well as any documents having to do with real estate, bank accounts, donations, or investments. In other words, save documents generated by others and provided to you for year-end tax purposes.
As for documents generated by you, tips on the IRS website note that records include “bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return.”
Scanning Tax Documents
You’ll probably take all your tax documents and stuff them into a box, drawer, or folder. That’s fine, as long as you can find them quickly later when you need them.
A faster and more convenient way to make sure you can find documents later is to digitize them by scanning them. Scanning your documents also gives you the benefit of creating a backup, so that if anything happens to the physical copies (fire, flood, four-year-old), you’ll have a spare set.
You can use a big desktop scanner or multifunction printer that has a scanner included, which is useful if you have big stacks of pages you need to scan. If you only have a handful of loose documents, you might be better off using a mobile scanning app.
Many mobile scanning apps are free. They turn your phone into a scanner. They find the edges of the documents automatically and convert images to PDFs. If you’ve never used one before, I absolutely urge you to give one a try. They’re super easy to use.
Saving and Naming Tax Documents
Once you scan your documents, the most beneficial thing you can do to help yourself later is to name the files intelligently and stick them in a folder with a very clear name, such as “2016 TAX DOCUMENTS.”
Use both the tax filing year and the words “tax” and “taxes” in your computer folder and in the names of your files. That way, when you need the files later, you can search for them even if you don’t remember exactly where you put them.
For the filenames, also include the name of the form, such as 1099-INT or W-2, and include any other specific details that signal to you or someone else who handles your documents exactly what the file contains. For example, a good file name for a 2016 1099-INT from Duffy Bank would be: 2016-TAXES_1099-INT-DuffyBank.
Shredding Tax Documents
It doesn’t hurt to save digital copies of your tax documents indefinitely, but you can of course safely dispose of paper copies after a few years. As mentioned, the IRS has guidelines for which documents must be saved for what amount of time. If you’d rather err on the side of caution, seven years is the number to remember, as that’s the longest time period the government requires.
Because you’ll be filing for 2016 this year, you can safely shred anything from 2009 or earlier. If you run a small business or have a lot of sensitive documents, owning your own shredder is the way to go. They’re not that expensive, with the best shredders tested at PCMag ranging from $159 to $329. The Swingline Style+ Super Cross-Cut Shredder is the least expensive of the top-rated models.
E-File Your Taxes
Now that you understand how to deal with your tax documents, it’s time to start actually doing your taxes—and the earlier, the better. While you technically have until April 18 to do them, getting your taxes done sooner is good for your peace of mind. If you get a refund, you’ll get it sooner—and who doesn’t want that? If have to pay, well, you’ll have more time to figure out how to deal with that, too.
Furthermore, if you are missing a document or one of them turns out to be inaccurate, it’s far better to find out now than at close to midnight on the last day. You can always get an extension, of course, but no one wants to be dealing with that kind of last-minute stress if they can avoid it. Consider, too, that if you need to contact support at the tax filing service of your choice, your chances of being able to reach someone are far better now than if you e-file your taxes at the last minute.
We have two favorite tax-preparation services for your 2016 taxes (the ones you need to file in 2017). TurboTax Self-Employed is the top choice for those who want the very friendliest interface and the most extensive support, including the ability to video-conference with professionals who can look at your return in real time. TaxAct Online Premium is our Editors’ Choice for doing your taxes on a budget, if you don’t need quite as much hand-holding. See our roundup of the Best Tax-Preparation software for more.