The Reference Section

A collection of wealth improvement articles

Tips to Organize Your Tax Records
Creating order out of chaos

As important tax records start filling mailboxes, how can you make sure your tax preparation goes smoothly and efficiently this year? Here are some tips.

  1. Keep it all in one place. It seems obvious, but how often have you found yourself going through piles of paper looking for that elusive missing 1099 tax form or charitable deduction receipt? If you only do one thing, this is it. Granted if all you do is this, you end up with a massive jumble of paper, but it is better than missing something.
  2. Time to sort. The best idea here is to sort your information into the same buckets as your tax return. At minimum sort the information into the basic categories. If you have a lot of something, then sort into sub-detail categories. A basic list of the more common items is here for your use.
    1. Income
      • Wages
      • Alimony
      • Business income (K-1s)
      • Interest Income (1099 INT)
      • Dividends (1099 DIV)
      • Winnings (W-2G, 1099 G)
      • Social Security
      • Investments (1099 B)
      • Other Income Items
    2. Income Adjustments
      • Student loan interest
      • Tuition & fees deduction
      • Alimony paid
      • Educator expenses
      • Moving expenses
      • Other education expenses
      • IRA contributions
      • HSA/MSA contributions
    3. Itemized Deductions
      • Taxes Paid
      • Charitable contributions
      • Interest expense (mortgage/home equity)
      • Medical/Dental expenses
      • Investor/other expenses
      • Casualty/Theft losses
      • Unreimbursed employee expense
    4. Credit information
      • Child & dependent care expense
      • Other credit related expense
      • Adoption expenses
      • Education expenses
    5. Business/Rental
      • Sort income and expenses for each business activity or hobby activity or rental unit.

    Note: Remember this list is not all-inclusive, for instance, you will need to retain Form 1095 to prove health care insurance. It is here to help you sort your information into a usable form to make tax filing easier.

  3. Not sure bucket. There may be things you receive that you are not certain about needing for tax filing purposes. These items should be gathered in one place for review.
  4. Time to sum. Once the information has been categorized, create a summary of the information. This summary can be a printed copy of an organizer or it could be a simple recap you create.
  5. Is something missing? Pull out last year’s tax return and create a list of things you needed last year. Use this as checklist against this year’s information. While this process will not identify new items, it will help identify missing items that qualified in prior years.
  6. Finalize required documentation. Certain deductions require substantiation and/or logs to qualify your expense. Common areas that require this are: business mileage, charitable mileage, medical mileage, moving mileage, non-cash charitable contributions, and certain business expenses. These logs should be maintained throughout the year, but now is a good time to make sure they are complete and ready to go for tax filing.

With the amazing mix of taxable income items, various deductions, and credits it is very easy to overlook something. Hopefully, by following these tips that risk is greatly reduced.