85Shares
This post contains affiliate links, which means we may receive a commission if you click a link and purchase something that we have recommended at no extra cost to you. Recommended products and services are based on my positive experience with them. Please check out our full affiliate disclosure
This post is all about how to organize tax documents.
When it comes to taxes, my favorite part is actually getting all of our tax documents organized for our accountant.
It really all depends on what kind of a system you are using throughout the year, so that you do not have to stress when tax season rolls around! Most people freak out at the thought of how to organize tax documents.
I wasn’t always this excited for this annoying, yet necessary task.
However, as I got older and concerned myself more with setting up a system for our financial, health and tax records, I knew I had to find a system that would teach me how to organize tax documents easily. Also, it would need to be a system that I’d implement once and then use it year after year without a fail.
If you are panicking or stressing out right now because you don’t know how to organize tax documents, don’t worry because I will show you a super easy system how to organize tax documents, a system that you will love and use without hesitation.
Quick Navigation
Step 1: Organizing Tax Documents
If you are wondering if there is still an easy way or system out there that shows you how to organize tax documents then we’ve got you covered in this post.
If you are the kind of person that has papers all over the place (most likely shoved all of their important documents into a shoe box), and wonders how to organize tax documents for your accountant, then what I am about to tell you is going to actually make your life so easy. You will feel relaxed throughout the year and especially when tax time comes around because you will have all your tax documents ready for your accountant.
You want to create a nice mood before you start gathering all of your documents. Maybe open the window and let some fresh air in, light a nice candle, and make sure you have a big table available.
You need a large table because you want to spread out, something like a dining table is preferred. You want to make sure to gather all of the documents you were given throughout the year in one area, namely your dining table.
Here are some of the documents that you were given throughout the year (there could be more, so check with your accountant!):
- Income (W2/1099), or T4/T1 (for Canadians)
- Personal property tax bill, especially if you have a home office
- Interest paid, if applicable (loans, mortgage, stocks, other deductions that could apply)
- Donations (any donations made to registered charities)
- Health receipts that can be claimed (for example in Canada)
- Other receipts that are applicable (check the IRS (US) or CRA (CA) websites respectively)
- Notice of last year’s tax assessment (if applicable)
It’s best if you make piles on your table and if you are organizing documents and records for your spouse as well, keep that pile separate from yours.
The last thing you want is to put all the papers mixed together so your accountant has to waste time sorting through it. It will save the accountant time going through and sorting.
When you separate the tax documents this way, your accountant will not have to spend more time on going through your documents, so filing your taxes will be much quicker for your accountant.
Make Sure You Label All Documents
While you compile all of the different tax documents, go ahead an make categories of each stack of documents.
Now you want to label each category:
- Income slips/stubs
- Personal property tax bill
- Medical bills
- Loans (i.e. student loans)
- Real estate documents, potentially applicable (year end interest statements, etc.)
- Home office deductions (if applicable)
Step 2: Keeping Tax Documents Organized Until You Give Them To Your Accountant
There is an easy way to keep track, file and store your tax documents and records throughout the year.
You will no longer use a shoes box, trust me!
After you have organized all of your tax documents into correct piles, you can store them in different ways all of which are nice options:
- In a labelled zipper poly envelope but clipped together with crocodile clips
- In regular letter-sized envelopes for each category, labelled in hand-written form
- A carrying file folder made from plastic (from Pendaflex, the Container Store) with each hanging file folder being labelled
- An accordion file folder, all tabs labelled
- Freedom filer – home filing system
When it’s time to give the tax documents to your accountant, you will have everything handy. No more stressing about where you’ve put such and such document. It will be in it’s place and ready to be handed over.
Step 3: Keeping Tax Documents Organized Year-Round
Now that you have sorted, organized and compiled and kept these tax documents in one place, you want to make sure that they stay organized year-round.
From all the options of how to keep your tax documents organized year-round, I find the Freedom Filer one of the best methods of filing.
What Is The Freedom Filer
The Freedom Filer is a system that logically and easily let’s you organize and file all of your important documents year-round.
The neat thing about the Freedom Filer is, that you can create any category that you need for your filing system. The Freedom Filer is great for home systems or business systems.
You can quickly have all your documents in one specific place, you can quickly file your documents (because it’s laid out in a way that doesn’t confuse you), and finally is a way to do almost no maintenance!
Some of the common categories within the Freedom Filer are:
Filing Index
- Odd and even years divided in 12 months (January to December)
- Odd and even years tax category (includes sections such as: income forms, deductions (charity, medical, and other), and any other category you will require can be made by adding a file folder with the appropriate label.
Besides the easy maintenance filing system for the months and different tax categories, the Freedom Filer also includes sections such as:
- Permanent files: such as certificates and ID, Education, Health, Investments, just to name a few.
Permanent files are what the name already says: permanent. You wouldn’t take these out from the Freedom Filer.
- Changeable files: home insurance, health insurance, legal, licenses, just to name a few.
Changeable files are taken out every year because the documents they hold are only good for one year.
Lastly, you would have an archive section if you wanted to, where you kept always the previous year’s documents.
How Much Is The Freedom Filer
The Freedom Filer system costs under 40 USD. There are many options you can choose from depending on your personal needs. For under 40 USD, you will have a great filing system in place. You will no longer ask yourself how to organize tax documents because it is so easy to do this with the Freedom Filer.
What Do You Need In Order To Set Up The Freedom Filer
You will need to choose the type of filing set you require. There are many options, for example for business, or personal.
You will need to order some hanging file folders in the color of your choice as well. You can get them at Staples for example.
That’s pretty much it and you can get to filing your tax documents immediately.
You can find the Freedom Filer here.
How Do You Set Up The Freedom Filer
The instructions on how to set up the Freedom Filer come with the pack of filing set you are going to choose. This is great because every set it a bit different. There are images you can follow and much of the information you need to get started you can find on their website.
All in all if you follow the instructions, you can have your Freedom Filer set up in a matter of 5-10 minutes.
Why The Feedom Filer Works
If you are a scatter brain or are not a fan of filing documents, if you get easily frustrated with a binder system or really are just plain lazy, then the Freedom Filer works for you because it is that easy to set it up and maintain it throughout the year. It really doesn’t involve much thinking and you can feel confident that your documents are stored in the right categories and easy to find when you need them.
CONCLUSION: HOW TO ORGANIZE TAX DOCUMENTS FOR YOUR ACCOUNTANT IN 3 EASY STEPS
Organizing your tax documents throughout the year is essential if you want to have a stress-free filing system and be ready for tax season and your accountant when the time comes around. There are many ways how to organize tax documents, and it’s important that you find a method and system that works for you and is easy to maintain year after year. There is nothing more satisfying than knowing exactly where all your documents are, especially when you require them.
Other posts you might like
- What Does Networth Mean and Why Is It Important
- Easy Steps To Buying Your First House
- What Do Millennials Think About Home Ownership
- Discover How To Save Money With Sinking Funds
- How To Create A Budget That Actually Works For You
