Are you like most people who have a “healthy respect” (aka nightmarish fear) of the IRS and have every receipt, every return, every writing implement ever used or needed for filing your last 35 years’ taxes? Has your filing system expanded from a drawer to a whole closet “just in case”?
While that may be a little exaggerated, it’s not uncommon for people to still have boxes and boxes of papers they’re not sure if they should hold on to or alas…set free.
If you fall into the category of wondering whether to keep or not to keep all those papers, here are three guidelines to help you sort it all out.
1. “If it’s more than three, save a tree.” Generally speaking, the IRS will only go back three years if they’re going to do an audit, but some experts recommend keeping up to seven years worth of receipts, W-2s and other tax and investment supporting documents at the ready. (It’s always a good idea, however, to keep a copy of every return you’ve filed for as far back as you have them.) Click here for a detailed list.
The good news is these records no longer need to be in paper form since modern technology has made it possible for the IRS accepts digital copies. Getting into the habit of scanning paperwork into an organized virtual filing system such as Neat Receipt, Dropbox, Box, OneDrive, or Google Drive gives you faster and easier access to any and all paperwork you may need to get your hands on.
And once you’ve uploaded these documents and receipts, feel free to release the hard copies back into the world to be recycled into that coffee cup you’re going to deduct as a business expense on your next return. You’re saving the planet AND getting to write it off at the same time. Winning!
2. “Back it up to keep it up.” It’s easy to become dependent and somewhat mindless when it comes to keeping your entire life on your laptop, but take just a few minutes to backup your hard drive onto a portable drive on the off chance the unthinkable happens to your computer. Having a second way to access not only your tax documents but your vacation pictures and other important files will save you headaches, time and money.
3. Bonus Hack: You don’t have to limit to only scanning and saving your tax paperwork digitally. You can pre-save trees and avoid the paper avalanche by paying bills, banking and investing online as well. Headaches, time and money can also become obsolete because you won’t have to scramble to find “just one stamp!” or go to the post office (do they even still have those?) or fight traffic all just to pay a bill that can be done with a few clicks from even your phone.
If you’d like more clarification on what to keep or not or have any other accounting or tax questions, click here to connect with us today.