How to Prepare for Your Taxes and Set Up Your Files

by | Feb 15, 2022 | Financial Organizing, Paper Filing


These tips might be more about setting up a good filing system so you can not only easily prepare for this year’s taxes, but easily be prepared for next year’s as well.3 Steps to setting up a good filing system for easy tax preparation1. Pull out all of 2021’s papers.Put aside all the necessary papers and documents for preparing your taxes. Download a list of a standard necessary papers for preparing your taxes if you’re unsure which ones are needed for your taxes. Label and separate all the categories.Collect and put all these documents in clear zip envelopes like these that you can find at Staples.Shred/recycle all unnecessary papers. Download a list of what to discard and what to keep.
IF YOU FEEL LIKE THE NEXT STEPS ARE DAUNTING, YOU CAN HIRE ME TO COME HELP SET UP THIS SYSTEM. Clients still love this system that we created in the past.
2. Set up for the current year’s files.I find that a metal filling cabinet with hanging file folders is best for organizing files and papers. Create categories with the hanging file folders and then use tabbed file folders for the sub-categories. Organize the files in accordance with how your mind works.Tools Needed:

  • 2-drawer metal cabinet filing cabinet OR
  • Clear plastic File Box, like this one from Staples
  • Multi-colored hanging file folders with insert tabs
  • Multi-colored tab-topped folders
  • Optional: labels printed from a label maker

Steps to Creating Files:Choose categories, such as:

  • FINANCIAL
  • HOME/UTILITIES (covers home insurance, water/sewer bill, property tax)
  • AUTO
  • HEALTH
  • CREDIT CARDS
  • TAXES

Choose colors for categories, such as:

  • FINANCIAL—green
  • HOME/UTILITIES—blue
  • AUTO—red
  • HEALTH—yellow
  • CREDIT CARDS—purple
  • TAX DOCUMENTS–orange

Label insert tabs for the hanging file folders with the above categories andInsert tabs in hanging file folders (perhaps staggered).Drop in hanging file folders into drawer or file bin (maybe in alphabetical order).Label the subcategories on the tab-topped file folders in the same color, for example:

  • FINANCIAL subcategories, such as
  • Bank Statements
  • Mutual Funds
  • Roth IRA
  • Budgets
  • AUTO subcategories, such as
  • Auto loan
  • Auto insurance
  • Auto repairs
  • Auto Excise tax
  • Auto parking tickets/toll transponder info

File all your statements and documents in their respective folders, then place those folders in the hanging folders inside your file cabinet or bin.
3. Archive Tax Documents.After submitting your tax return, archive the return and the supporting documents (in a separate place, if possible) for 7 years. Bring out older (more than 7 years) tax returns and shred.