This post was updated Sept. 13, 2017.
My goal this summer, as it has been for the past few summers, is to get my office in order.
Yeah, that's my office floor. Stacks of old publications and materials from the tax and blogger conferences I've attended.
It's not by any stretch of the imagination a good system. So I swear that in the next few months I will go through these paper piles, determine what is still relevant, file it and dispose of the rest.
UPDATE: I finally did it! Check out the photographic proof, along with 5 tax record keeping questions and answers.
Taking tax record keeping digital: I use the word "file" broadly. I also plan to digitize as much of the material as possible.
While I am a paper person and do like some documents in the old-fashioned format, others are just as useful to me in PDF or jpg formats.
I already get bills and bank statements electronically. Much of my work-related reference material can be converted to e-documents.
The Internal Revenue Service feels the same way. The tax agency has been accepting electronic records as proof when it has questions about filings since 1997.
Create an added electronic set: If you're even more of a paper pack rat than me (yes, I know from this post's first picture that's hard to imagine) and haven't totally accepted electronic filing, you should at least create a duplicate set of records stored on an external hard drive or USB flash drive, burned to a CD or DVD or stored in the cloud.
In the few cases where your records are only provided on paper, scan the original into an electronic format.
The IRS suggests your e-record set include not only your tax records, filed return copies and the documents you used to do your taxes, but also bank statements, health care documents, identifications (Social Security cards, birth certificates, marriage licenses) and insurance policies.
In the old days, you could secure your important records in a safe deposit box or personal safe. Those also are good places to put your flash drives and other types of digital copies.
Filling in tax record gaps: When you start getting your records in order, either in real paper form or electronically, you might discover you're missing some documentation.
The IRS can help you fill in the gaps. You can order transcripts of your filing history.
You have two options.
Complete Form 4506-T or Form 4506T-EZ to order a tax return transcript. This document shows most line items on your return as it was originally filed, plus information on any accompanying forms and schedules.
You also can request a tax account transcript. This shows your return's basic data, including marital status, type of return filed, adjusted gross income, taxable income, payments and adjustments made on your account. An account transcript is free and it arrives in about 10 days.
You can request either a tax return or tax account transcript online from the IRS.
If you need copies of actual filed returns, file Form 4506. This, however, will cost you $50 for each tax return you request.
And if worse comes to worst and you lose your tax records, it is possible to recreate your tax records. It's not fun or easy, though, so be proactive and save your records as you go.
Transcripts useful for disaster claims: Having tax records handy is especially useful if you suffer disaster damages, as I noted last week at my other tax blog.
When a disaster strikes, you might be eligible for some tax relief. If it's a major disaster, you could refile your prior year's return and claim any losses for that tax year. You'll need you previous tax return to make such an assessment.
So make sure that tax considerations are part of your disaster preparations.
You also might find these items of interest:
- Tax record keeping time
- How long to hang onto tax records
- The importance of good, and separate, business records