Organizing Your Taxes with Categories and Sub-Categories

You can take it a step further and actually organize your tax documents into various folders or sub-categories (also by account number if you are a business). These would be based on the tax list and will definitely vary by person. Use a main hanging file with the tax year written on it. Then make subfolders for the various tax documents you need to keep.

You can start with four main categories within your tax year folder. The categories would be: Income, investments, expenses, deductions. That may be enough for you or your tax preparer to process things more quickly. You may want to write some notes on the folders to help remind you what types of documents go inside each folder.

For example, Tax Year 2015   

• Income
• Investments: 2015 forms received, year end bank statements, brokerage and mutual funds statements.
• Expenses: Mortgage interest, property taxes, medical bills, childcare, job related moving, other big ticket items such as a car or home.    
• Deductions: charitable donations, job expenses.

If you have a lot of paperwork to gather in any of the four above categories, then you may want to add sub-folders as well. Perhaps you have a lot of medical expenses and get lots of receipts to keep track of. Then you may want to make a sub-folder specifically for medical expenses within the larger “expenses” folder. You will want to refer to that tax preparation list to determine your needed categories. For example, not everyone needs to keep credit card statements unless they support some sort of deduction, and not everyone needs to keep utility bills unless you’re deducting for a home business.

Preparing your Tax Returns

You should receive all of your forms from your employers, banks and investment firms by mid February. However, that is not a guarantee.

Storing Your Tax Returns

Once you’ve filed your taxes you need to file your tax documents away. Make a file folder or use a large manila folder and write the tax year on it. Place a copy of your completed tax forms in there along with all of your supporting documents. Store this file somewhere safe and out of the way; keep it for seven years for an individual. After that, you will still want to keep the tax forms you filed, but it should be OK to purge the supporting documents.

Getting Ready for Next Year

Once done organizing your taxes for one year, you’re pretty much set for the following years! Your file system will now be empty and ready for the upcoming tax year. Make any adjustments to organizing your taxes to help streamline the process, without going overboard and making it more complicated than necessary. Were there things you were missing? Information you had to look for? Be sure to add any categories which you may be expecting paperwork for, or remove any which you won’t need. Now is a great time to tweak your system.

If you have any questions, please call Marie Morrell at 613-936-6873 or email: [email protected] or visit: www.workeasysolutions.com