Organizing for Tax Season

Most of the papers you need to document the income, interest and withheld taxes you report arrive in your mailbox in January, with investment-related 1099s often coming in February. Get ready for their arrival by creating print and online folders. It’s a good idea to create a paper and an email tax folder for messages relating directly to tax information. Since so much will come to you electronically, online folders are replacing physical filing cabinets.

Go paperless!

Indeed, for the few items still coming through the mail, you may be able to scan them in: Email announcements that documents are available online will land in your inbox. The postal service may deliver your W-2s in your physical mailbox — although some companies post them on a secure site for downloading. Mortgage providers, banks and other financial institutions often post important 1099 forms on your online account.

Paperless banking may have turned shoeboxes into receipt relics of the past, while youronline statements often contain key backup records for such potential deductions as:

• Charitable donations.
• Outlays for health care.
• Gambling winnings and losses.
• Property tax expenditures.

Many of us ignore the line items on these statements until we start our annual tax-filing ritual. However you may save time by taking a few extra minutes each month to jot down tax-related information, like:

• Expense title.
• Check numbers.
• Payee names.
• Dollar amounts.
• Dates.

Create a spreadsheet dedicated to tax records. Throughout the year, consider downloading and printing online documents that will be available for only a limited time.

Keeping track of everything

Here are some of the documents you should have handy:

• Documents related to life events — marriage, death of a spouse or divorce, deductible alimony payment records, adoption papers, and child custody agreements should all be saved.
• Paperwork related to childbirth. You’ll want the newborn’s Social Security card, childcare receipts and details on college savings plans.
• Home ownership information. Keep such paperwork as closing documents — it’s good to keep closing documents in case you paid real estate taxes or points when you closed that don’t appear on your year-end mortgage interest statement. Save annual mortgage statements.

Other documents to consider

You will likely also need these:

• Last year’s taxes, both federal and state. These are handy as good refreshers of what you filed and documents you’ll need.
• Retirement account contributions. Keep track of your contributions to a traditional IRA or a self-employed retirement account. Keep this information handy for tax time. The firms managing they probably have all the information online.
• Education expenses. Documents help your deduction claim here.
• State and local taxes. Save these documents so that they can be easily retrieved.
• Documents relating to a deceased relative. If, for example, a parent died during the year, you may be both an heir and executor. You will have to file their final return and keep track of funds and property you inherited.

The value of a tax return doesn’t end on April 15. You’ll need to provide this document to get a mortgage, apply for student loans and check the status of your refund. Generally, the IRS can audit you for three years after a filing date, and in some cases, even longer. Hold on to your return copies and supporting documents just in case.