Shakespeare Blog: View from the Lake

Group 512

Documents to Keep After Tax Season

Written By: Andrea Bulen, CFP®

Tax Documents

Tax season can be a hectic time of year, with a flurry of forms, receipts and financial statements to sift through. However, once you’ve filed your taxes and breathed a sigh of relief, you should take one final step to keep your financial records in order. The following is a list of important documents to save each year.

Tax Return

The most important document to maintain each year is a copy of your final tax return. Utilize secure online storage to keep at least 7 years of final returns. If you are using a personal hard drive, make sure those files are backed up. They serve as a reference for future tax filings and financial planning.

Supporting Documents

In addition to the final return, create a folder for all the supporting documents, e.g. W2s, 1099s, medical receipts, charitable deductions, etc. This year’s supporting documents can also provide an outline for which documents to collect next year. If you organize the files by year and use the same naming conventions, you’ll be able to easily cross check you have everything you need.

Medical Expenses

Medical expenses can be tax-deductible, so it is important to retain related documents. Keep receipts and bills for medical services, prescriptions and health insurance payments. These may be deductible on both your Federal and state return. Note: Your preparer may not ask you about these expenses. When in doubt, include it with your tax preparation documents you send your preparer. Saving these by year will provide reference when collecting documents for the following year’s taxes.

Education Related Expenses

If someone in your household is pursuing a post-secondary education and utilizing a 529 account, it is important to retain proof of the expenses you submitted for reimbursement from the 529. Since you are not required to submit proof when completing your tax return, this is often a topic the IRS will question taxpayers about after the return is submitted. There is no problem as long as you have retained proof the withdrawals were qualified.

Property Records

If you own property, it is crucial to preserve related documents. Keep records of property purchases, sales or refinancing, as well as mortgage agreements and loan documentation. A critical item is property improvement receipts, as they may affect capital gains or deductions when selling the property.

Business and Self-Employment Records

If you own a business or are self-employed, maintaining thorough records is crucial. Keep copies of business licenses, contracts, invoices, receipts and expense reports. These documents can assist in tracking income, deductible expenses and substantiating any business-related deduction.

While it may be tempting to declutter and dispose of all those financial documents, it’s crucial to exercise caution. Retaining key documents after tax season will prove beneficial for record-keeping, financial planning and future reference. Organizing and securely storing these documents will safeguard your financial well-being, offering peace of mind and protection in the long run. If you have questions about certain documents, your Shakespeare financial advisor is here to talk you through your personal situation. Invest some time and effort into organizing your financial records today to reap the rewards in the future.