Keeping your tax documents organized can be simplified if you know what kinds of records you need to maintain. Setting up a method for organizing will save you time when you are ready to prepare your tax return. If you use the services of a certified public accountant or a tax professional, having your information organized will also save you money, since financial experts may charge an additional fee for recordkeeping.c 

Maintaining organized records will also serve as a protection in the unlikely event you are audited by the IRS.c Keeping written proof of your deductions and expenses will verify the legality of your claims. You may also need some of your tax documents for other purposes, such as establishing financial aid for college or applying for a home mortgage loan. You should especially keep organized records if you are running your own business, since they will help you to determine the financial state of your company.c

Before you begin gathering information, you first need to find out which documents you need to keep up with. This means that you will need to examine your tax situation. A good place to start is to look at the federal income tax return you filed last year. This will give you an idea of the kinds of documents you will need. On the other hand, if your tax circumstances are changing this year, you will need to find out the tax implications of any changes.

If you own your own business, you will need to keep up with receipts that document your income received and your expenses paid. If you are buying a a home, you will need to keep your end-of-year mortgage interest statement and real estate tax statement. If you will be claiming itemized deductions, you will need to keep proof of the eligible deductions, such as medical expenses and charitable donations.c 

Taxpayers who are enrolled in college will need to keep up with education expenses that can be deducted on Form 1040. Parents who pay for childcare will need to obtain the name and Social Security number of the individual or company that is providing childcare, so that they can write off the amount paid on their return. Divorced taxpayers who pay alimony will need to keep up with the amount paid, including canceled checks.c  

Once you assess your personal financial circumstances, you can start gathering the documents needed for your return. If you are unsure about what records to keep, see IRS Publication 552 "Recordkeeping for Individuals." Examples of the kinds of tax documents you may need include:

1. Social Security numbers for everyone who will be claimed on the tax return
2. Income statements, such as Form W-2 or Form 1099
3. Bank statements: If you are claiming charitable contributions, these can serve as proof of your cash donations.
4. Gas mileage: Miles driven for business, charitable, moving, or medical purposes can be deducted
5. Repair bills: If you use your vehicle for business or if you operate a business out of your home, you can deduct the amount of any repairs you had done.
6. Credit card statements that show deductible expenses
7. Canceled checks: These can serve as documentation for several expenses, such as wages paid to employees, charitable contributions, deductible insurance payments made, business utilities, etc.
8. Travel invoices: If you made trips for business purposes, you can deduct the cost of various travel expenses.
9. Records relating to the sale or purchase of an asset, such as a home, stocks, or land
10. Retirement contribution statements
11. Copies of your federal and state tax returns from prior yearsc  

The third step to organizing tax documents is to establish a system that you can use easily and regularly. An inexpensive method is to use an accordion file. You can label each folder in the file for each expense category. For example, business expenses can be in one folder and home mortgage expenses can be in another.

If you would like to simplify recordkeeping as much as possible, consider separating your records by the tax form that they are reported on. To do this, you will need to get a copy of the tax forms and schedules you will use for this tax year. You can download these forms directly from the Internal Revenue Service website or you can request hard copies of them by mail.c

For example, to organize your records for itemized deductions you can download a copy of Schedule A.c You will use this form to report several expenses, including:

1. Medical and dental expenses
2. Charitable donations
3. Home mortgage interest and real estate taxes
4. Unreimbursed employee expenses
5. State and local income taxes paid on the prior year return
   

You can then keep all of the records that relate to these expenses in a folder marked "Itemized Deductions." Be sure to add them to the folder as you receive them throughout the year. Then, when you are ready to file your federal return, you can simply remove each tax form's materials as you prepare it.

Whatever filing system you choose, be sure that it is one you can reasonably afford and keep up with. According to IRS guidelines, you should keep prior year tax returns and records for at least three years.c