For some, tax season is an enjoyable time for reviewing and organizing last year’s finances. For others, it brings a wave of dread as they know that they will soon be searching through old receipts, combing through duplicate files and stressing about due dates. If you are in the latter group, never fear! Using some of the 5s office principles, we have some great tips for you to create organization in your tax files, starting right now.
The following is a great system that we have shared with many of our clients. It’s easy to put in place and for other members of the household to understand. The best part is that, so long as you follow one simple guideline, those receipts and other tax related documents will STAY organized throughout the years!
Here’s how to set it up
Choose a designated area such as a filing cabinet, banker box or rolling cart. This will be your tax area. Next, hang seven hanging folders, along with seven tabs, labeled one through seven.
The first folder will be designated for the current tax year, with folder number two representing last year, and so on.
This system is designed to be a moving rotation
Every year after your taxes have been filed, move each file back to the folder behind it, making room for the newest tax return, and shredding the contents of folder number seven.
Note: be sure to check with your tax advisor to verify that you only need to keep your taxes for seven years. The benefit of doing this is that it acts as a visual cue shred the oldest folder. If you do want to keep returns from 7 years or older, that’s ok too! They can go into a banker box and put into deeper storage.
Organize the receipts one tax year at a time
As you receive papers like W-4s, donation slips and other deductible items, simply drop them into your current year’s tax folder. If you need to set up additional files placed behind folder number one, go for it! Just remember that this is your new tax area. Everything that pertains to taxes should go here.
Don’t worry about spending too much time sorting and organizing as you put the documents in each folder. As long as you know where to find these items come tax time, you’ve won half the battle!
What tips or systems do you have to keep your receipts and other tax items organized?
We’d love to hear about them!