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How to Get Your Papers Organized Before Tax Time

A professional organizer offers a manageable plan for tackling those paper piles now to make April a little easier.

As the new year rolls in, so do tax documents and year-end financial statements. What do you do with these documents? If you stack them along with other papers you’ve collected over the year — and vow to be more organized next tax season — you’re not alone. 

That said, now is a great time to start chipping away at your paper piles so it will be easier to find what you need when you’re ready to file. And then you can set up a system to make next year’s tax season less daunting.

desktop computer desk and chair

By Patricia Lee, Houzz Contributor

Which Types of Papers to Recycle, Shred or Throw Away

I recommend that you keep three bins close by as you sort through your papers: trash, shred and recycle. You may want to check the guidelines of your city’s waste management company as they can vary, but as a general rule photo paper and thermal receipts cannot be recycled and should be considered trash. Similarly, any papers that have glitter, foil accents or plastic or wax coating cannot be recycled. 

Of course, papers with personal information such as your name, address, Social Security number and bank account or credit card numbers should be shredded to prevent fraud and identity theft. 

Most other papers can be safely recycled.

Easy Paper Categories to Tackle First

For most organizing projects, it’s usually easiest to start by decluttering the least important and least sentimental items before moving on to the most significant ones. Taking a first pass to eliminate papers that won’t require too much mental effort is a good warmup before you launch into harder decisions.

1. Junk Mail

In this age of digital advertising, you’d think you would receive less junk mail. However, that doesn’t appear to be the case. 

The good news is that you can usually get rid of these papers without thinking too hard about them. I suggest you recycle unnecessary catalogs, coupons and ads. Shred any credit card offers or other junk mail that may contain personal information. 

If you wish to unsubscribe from unwanted snail mailings, you can contact most company customer service departments to opt out. Alternatively, there are various online services that help you remove your name and address from distribution lists.

soft basket with magazines

2. Irrelevant Papers

Once relevant papers have become irrelevant, it’s time to get rid of them. Some examples would be old magazines and newspapers, unnecessary receipts, old school notes, outdated business cards, utility bills, bank statements and more. 

You may have good intentions to work your way through a backlog of magazines because you feel wasteful discarding them without reading them. But be realistic about what you can finish reading before the next delivery. 

Also, if you don’t need to save your utility bills and bank statements for tax or other purposes, you may be able to discard them after you’ve checked them for accuracy and reconciled them with your payments and bank accounts. 

And most receipts that don’t need to be kept for tax, insurance or resale purposes can be tossed after the return window has closed, the warranty has expired or you know you’ll be keeping the items (like groceries).

desk with chair and bookshelf

What to Do With Harder-to-Tackle Paper Categories

Once you’ve shaved off the first layer of nonessential papers and are ready to dive a little deeper, think about the main categories that cover what you may need to keep. These vary for each person, but some common categories include:

  • Taxes

  • Action items (bills to pay, cards to reply to)

  • School documents

  • Medical records

  • Property records

You may have additional categories that apply to you. Once you’ve determined your categories, sort remaining papers into them. The idea is to divide your paper organizing into smaller and more focused bites so it’s less overwhelming. Then you can further sort each category to determine what you need to keep and what you can let go. 

For this article, let’s focus on the category of taxes.

The Papers You Need to Keep for Taxes

The first step in organizing your tax-related papers is knowing what you need to keep. You don’t want to keep too few records and not be prepared for a potential audit. Nor do you want to keep excess, space-consuming documents. 

In the broadest of terms, calculating your income taxes requires determining all the income you’ve received during the year minus eligible deductions and credits. So do your due diligence to find out your specific, personal requirements for each part of this work. 

If you have a tax preparer, he or she should be able to provide you with a list of requirements. If not, you may be able to find some guidance on the IRS website, through online tax-preparation resources and in your previous year’s tax return. Here are some examples of information you may need regarding your income, deductions and credits (not an exhaustive list):

Income

  • Wages, salaries, bonuses and tips

  • Interest earned

  • Stock sales and dividend income

  • Rental income

  • Retirement account distributions

  • Unemployment benefits and disability payments

  • Advance commissions

  • Lottery payments


Deductions

  • Contributions to retirement accounts

  • Student loan interest

  • Capital losses

  • Mortgage interest

  • State or local taxes

  • Medical expenses

  • Charitable contributions


Credits

  • Recovery Rebate Credit

  • Child and dependent care credit

  • Adoption credit

  • Residential energy-efficient property credit

  • Health care credits

I recommend you create a checklist of the specific income, deductions and credits that pertain to your situation. 

My own list includes the forms (W-2s, 1099s, 1098s and so forth) and information (charitable contributions, medical expenses and so on) that I need to have for my tax filing. This checklist helps me stay organized each year. I would otherwise not be able to remember the detailed requirements of this once-a-year task, and I’d risk submitting an incomplete tax return. 

Keep in mind that tax requirements do occasionally change, either due to the IRS or personal situations, so it’s wise to update your checklist when that occurs.

6 Common Causes of Clutter and Their Cures

Storing Your Tax Documents

1. Current Tax Year Documents

There’s plenty to sort through at tax time, so the more you can eliminate searching for documents in April the better. To simplify, I recommend you keep all your current-year tax documents corralled in one place. 

I keep two sets of tax documents: personal and business. Neither is exceptionally complicated or document-heavy, so for me two hanging folders (one for personal, one for business) works perfectly. 

Throughout the year, I put anything tax-related (charitable contribution receipts, business receipts) in its correct folder as soon as I receive it. For business expenses, I write the category and purpose (marketing, office supplies, meals and entertainment) on the back of the receipt right away to avoid the chance of forgetting it.

The method that works best for me is to collect all my tax documents in each folder all year and then sort more specifically when it’s time to prepare. But if your taxes are complicated and you must retain many papers, you may want to create smaller subfolders to keep categories sorted throughout the year. 

Whatever method you choose for collecting your tax documents, it will be successful only if you actually use it. Therefore, make sure your document storage is in a spot you can easily access. Otherwise, there will be a strong tendency for documents to pile up on a counter instead of being filed away appropriately.

2. Previous Years’ Tax Returns and Documents

Tax returns and documents that have already been filed with the IRS and state agencies need to be retained in case of an audit. Depending on your situation, the number of years you need to keep your tax documents can vary. 

At the time of this story’s publication, the IRS website stated that the period in which you can amend your tax return or the IRS can assess additional taxes ranges from three to seven years. The period of limitations in my state is four years. Therefore, out of a great abundance of caution, I keep my physical tax returns and documents for seven years.

Personally, I keep my past tax returns in a portable file box. I store the box in my office, but it doesn’t get a prime spot, since I take it out only once a year to add the newest set of documents and remove the oldest set. (I then relabel the empty folder from the oldest set for the following year’s tax documents.)

I also save digital copies of my tax returns, which I can keep indefinitely. Some recommend keeping tax returns and W-2s forever, in case the IRS ever claims you either didn’t file a return or filed a fraudulent one. I recommend you consult with a tax professional to confirm the safest route for you.

 

Patricia Lee, Houzz Contributor is a professional home organizer in the San Francisco Bay Area. 

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