April’s tax deadline has come and gone and you met the filing deadlines (way to go!), but before you put all that behind you, you must decide what documents to save and for how long.
Here are three tips to consider:
Tip 1: Store your prior year’s tax returns and the supporting documents. It can be helpful to refer to the prior year’s tax return as a guide when preparing the current year’s return. In addition, individual taxpayers should keep the following records to support items on their tax returns: bills, credit card and other receipts, invoices, mileage logs, cancelled checks or any other proof of payments, as well as records to support deductions or credits claimed on a tax return. Consult with your tax advisor to understand what other documents should be kept and stored.
Tip 2: Be prepared to keep tax documents for several years. As a general rule of thumb, the IRS recommends keeping tax returns and supporting documents for three years, assuming that income has been reported accurately and returns have been filed properly. It’s important to note that insurance companies, creditors, and some state governments may require individuals to keep tax information longer than the IRS.
Tip 3: Adopt an archiving system that enables you to store information securely and retrieve it quickly and easily. A well-organized record keeping system makes finding information much easier. Remember that when taxing authorities want to see information, one of their primary concerns is that the taxpayer can deliver it promptly. Quick access to tax information is also essential when applying for mortgages, financial aid, or other loans.
It can be helpful to use a secure online tool, such as FidSafe. Tax returns and documents can be scanned, stored, and shared for as long as necessary. One of the major benefits of digital archives is that documents can be retrieved anytime and from anywhere with internet access. It is safe, easy, and secure. Unlike paper files stored in bankers’ boxes, digital documents are also protected from unforeseen household problems, such as water damage due to broken pipes, or fires.
Now that the tax crunch is over, it’s a great time to take a deep breath and take a few moments to get organized. Investing time now to implement a secure digital archive will save you time in the future. Using a digital archive for managing documents just makes sense and can make next year’s tax season a little less stressful.