How to Organize Your Tax Documents Like a Pro (2024)

Organizing tax documents isn’t on anyone’s list of fun activities. But it’s got to be done, so let’s roll.

It’s February 1st, and that means you’ve got one month of the under your belt. Woot woot!

Throughout January, we worked on creating a solid organizational foundation by completing some decluttering prep work, nailing down our planning tools, and establishing twocentral organizational zones in our home.

By now I’m sure you’re chomping at the bit to begin organizing specific spaces in your home. Lucky you…we’re going to spend the month of February getting our home office space under control! And we’ll begin by organizing tax documents.

We’re going to rip the proverbial Band-Aid off and start with setting up a system for getting our tax documents in order (I can hear your collective sighs).

Believe me, I’m no fan of tax season either, but having a solid system in place for organizing your tax documents really does strip away so much of the dread associated with tax season.

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Let me begin today’s post with a few disclaimers:

1. Since I’m not an accountant, I am not offering specific tax advice here…just suggestions on how to organize the documents you may need to file your taxes;
2. Everyone’s tax situation is different and varies in complexity based on your assets, whether you are self-employed, etc. With that in mind, I’m going to cover some basic concepts that should be applicable to most people. Use my tips as a starting point, then consult with your local tax/accounting pro to see how to best adapt things for your specific situation.
3. There are several tasks that fall under the umbrella of Tax Organizing that really should be done on a continuous basis throughout the year, like keeping track of your (non-cash) charitable donations and your mileage. This week’s assignment focuses on organizing the papers that typically become available in January.

Phew, now that we’ve got that out of the way, let’s talk about some ways to make tax preparation time as painless as possible.

CREATE A CUSTOM TAX DOCUMENT ORGANIZATION CHECKLIST

I don’t know about you, but attempting to gather all of the different documents and bits of information I need in order to complete my tax forms is a royal pain. Yes?

Since doing my taxes is a once-a-year activity, I have a hard time remembering everything that I need. To make this process even more annoying, these documents arrive in your mailbox (or become available online) at various points throughout the tax season.

It requires constant vigilance to keep on top of it all.

This is one example of when creating a checklist can really save your bacon. My personal checklist serves as a reminder that I’ve got to be on the lookout for a dividend statement for one of our investments, and a 1099 form from an obscure savings account that I forget we have.

Going back to that theme of “everyone’s tax situation is different”, I’ve created a basic Tax Document Checklist for you to customize and use as a guide as you go hunting and gathering for those papers.

{Hint: Take a look at last year’s tax documents to see what you should be looking for this year}.

DESIGNATE A SPECIFIC STORAGE CONTAINER FOR ORGANIZING TAX DOCUMENTS

Since there really is no more important paper category, tax documents really deserve their own container (instead of living in your general action file container). My paper tax docs live in this pretty container on a shelf in my home office.

As the tax papers for the current year (or next year) begin to trickle in, I simply file them away in here for when I’ll eventually need them (checking it off on my checklist to keep a running tab on where things stand in the document gathering process).

CREATE SEPARATE FOLDERS FOR INCOME & DEDUCTION CATEGORIES

To the extent possible, I gather and store my tax documents/information electronically. For example, we’re able to download digital versions of most 1099 forms from the various banks/investment companies. I can also gather the majority of the data I need to calculate our home office deduction online from our utility companies.

Related: Six Ways to Go Paperless in the Home Office

When these documents become available, I download copies and store on my computer using a folder structure for the current tax year that looks like this:

Within each year folder, I create 4 main sub-folders:

1. Tax returns (where completed copies of that year’s returns are kept)
2. Income
3. Deductions
4. Refined Rooms AKA Business (further broken down into Income and Deductions subfolders for my business)

Just like with any digital organizing project, it’s really important to use a file naming convention that’s both descriptive (for search purposes) and consistent. That way, if the file 2014 Income – MEDCO Stocksomehow gets misfiled, I’ll immediately know where it belongs.

Despite my best efforts, we still have a decent amount of tax documents that arrive in paper format. That’s where my designated tax file box comes into play. I use the Freedom Filer system to create a series of file folders that mimic my digital file folders.

Once I’ve gathered all of my tax documents for the current year (in either digital or paper format), I use my trusty Fujitzu Scansnap document scannerto quickly create digital versions of the paper documents, then file them into my digital folder system.

Of course, if you decide to keep your archival tax documents in paper format, you can skip this step.

Related: Going Paperless 101 & Organizing Digital Documents

Once you’ve gathered all of your documents and sorted them by category, you are officially ready to ROLL!

If you’re like me, that means completing the Client Organizer packet that your accountant asks you to provide, along with all of your supporting documents.

I complete the Client Organizer packet, scan it, then upload it to my tax documents folder for the specific tax year (which contains all of the other supporting documents) on my computer. Since I store electronic documents in Dropbox, it’s then simply a matter of encrypting the folder and sharing it via Dropbox with my accountant.

If you don’t digitize your tax documents, you can simply remove the folders from your container, put them all into a large envelope or accordion file, and deliver your organized paperwork to your accountant.

Your accountant will hug you when they see how easy you’ve made it for them to sift through the information. Of course, if you’re the one completing your tax forms, then you’ll hug yourself!

Your Assignment for the week:

1. Create a checklist of documents you need in order to complete this year’s tax return
2. Designate a storage container for collecting all incoming tax documents
3. Determine if you’ll store your long-term tax documents in digital or paper format
4. Create separate folders (either paper or electronic) for your specific income and deduction categories
5. Gather all documents on your checklist
6. If you plan to store your tax documents digitally, scan any paper documents to create digital files (using a consistent and descriptive naming convention)

Once you’ve completed your assignment, share a photo of your tax document collection container onInstagram(use the hashtag#OrganizeandRefineChallengeand don’t forget to follow me).

Let’s all make a pinky promise to get our taxes completed and filed EARLY this year. In fact, come back to this post after you’ve filed your taxes and let us know the date you filed. I promise to give y’all a high five!

This post is part of the Organize and Refine Your Home Challenge

More Help with Organizing Personal Finances

• My Favorite Tax Organization Apps
• A System for Organizing Charitable Donation Records
• How to Organize Bills
• Organize Your Finances with a Yearly Review