Documentation is essential for the IRS when filing taxes. Saving receipts and a myriad of tax-related items can seem overwhelming. Without a system for preserving documents, individuals can easily lose track of those important papers. The result is lost money in deductions.
No matter what method people use, it’s important that they choose a system that best fits their needs and more importantly, they’re likely to maintain. No one enjoys the process of saving documents for tax time or sorting through them, but it’s a critical step for income tax returns.
Another option that people are turning to is digital documents. Digital scanners are an excellent way to keep a backup copy of paperwork of all types. It’s a good idea to keep originals, while digital copies provide an important resource in the event of an audit. Digital documents can also be backed up to the cloud. The following are four ways that people can utilize to keep their tax documents organized.
It may seem old-fashioned, but a simple box with file folders is still a reliable way to keep track of tax documents. When individuals receive receipts and other important paper documents, simply place them in the correct file folder. However, many people still maintain a box in which they drop documents, pay slips and receipts and just sort them at the end of the year.
Equally effective is using 9×12 manilla envelopes and labeling each envelope for specific categories. Don’t forget to write the tax year the documents are for on the envelope. The envelopes need to be placed in a box or file cabinet to ensure all tax documents are kept together in a single location.
There are deductions for a wide variety of situations. Individuals can organize their documents by categories that include, home, business, military service, and employer, and self-employment for side hustles.
Individuals will still need to keep the originals, but a spreadsheet is an easy method to jog a memory at the end of the year and ensure that income and expenditures match the paper documents kept in boxes and envelopes.
At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs. We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!