Time to Prepare Your Taxes: What to Keep and What to Shred!

It’s that time of year again—tax season! While the idea of sorting through stacks of paperwork may not excite you, organizing your documents properly can save you from stress and last-minute scrambles. But with all the receipts, statements, and forms piling up, it’s hard to know what’s essential to keep and what you can safely get rid of. Don’t worry; we’ve got you covered with a simple guide to help you prepare your taxes with ease.

 

What to Keep

When it comes to tax preparation, having the right documents on hand is crucial. Here are some key items you’ll want to gather and hold onto:

1. Income Statements
Whether you’re an employee or self-employed, income documents are essential for filing your taxes. These include forms like W-2s, 1099s, or pay stubs. If you’re self-employed, you’ll also need records of any income earned from clients or gigs.
2. Tax Deduction Documents
If you plan to claim deductions, be sure to hang on to any receipts, invoices, or records for eligible expenses. These may include medical bills, charitable donations, childcare costs, or business-related expenses if you’re self-employed.
3. Investment and Bank Records
Be on the lookout for forms like 1099-DIV or 1099-INT that summarize your investment income or interest earned. Bank statements can also come in handy if you need to verify transactions.
4. Mortgage and Property Tax Records
If you’re a homeowner, statements showing the property taxes and mortgage interest you’ve paid are essential for claiming deductions tied to homeownership.
5. Previous Tax Returns
Keeping at least three years (or more, depending on your state) of past returns can make this year’s filing process smoother. They serve as a quick reference in case you need to verify income, carry over deductions, or provide documentation during an audit.

 

What to Save

Once you’ve gathered all the necessary documents, it’s important to decide what you’ll save long-term and what you can safely discard after filing. Here’s a quick breakdown:

Long-Term Storage

Certain documents should be saved beyond tax season, such as:

• Previous tax returns (at least 7 years if there are claims like losses or deductions that could be audited).
• Records tied to property ownership, like purchase agreements or major home improvement receipts.
• Legal documents, contracts, and birth or marriage certificates that relate to tax filings.

What You Can Discard

Once the IRS review window closes—generally three years after filing—you can purge certain items. Things like older receipts, expired warranties, or minor transaction records that aren’t tied to your taxes can go. Just make sure to securely dispose of anything containing sensitive information.

What to Shred

When you’re sorting through your tax documents, it’s just as important to know what to shred as it is to know what to keep. Disposing of sensitive paperwork securely is critical to protecting your personal information and reducing the risk of identity theft. Tossing documents with confidential data into the trash leaves them vulnerable to prying eyes, but shredding ensures they are destroyed beyond recovery.

Here’s a quick list of what you should shred when cleaning out your tax files:

• Old Tax Returns: If they’re beyond the IRS review window, typically three years (or seven years for returns with claims like losses or deductions), they can be safely shredded.
• Outdated Financial Statements: Bank statements, credit card bills, or loan records that aren’t tied to active accounts or your current tax filing.
• Expired Receipts: Any receipts not needed as proof for deductions or not tied to major purchases or warranties can go.
• Medical Bills: Once they’re no longer needed for claims or tax deductions, shred them to protect your health data.
• Documents with Personal Information: Anything featuring sensitive details like your Social Security number, bank account info, or passwords. This includes utility bills, insurance forms, and paycheck stubs no longer in use.

Shredding isn’t just about tidying up; it’s about maintaining control over your private data. If you have large amounts of paperwork to dispose of, consider using a professional shredding service to manage the task efficiently and securely. Services like Proshred® can provide on-site shredding, giving you the peace of mind that every document is thoroughly destroyed.

By taking these extra steps, you not only create a clutter-free workspace but also safeguard yourself both financially and personally as you head into a new tax season.

 

The Importance of Secure Disposal

When cleaning out old files, don’t simply toss sensitive documents in the trash. Papers containing personal details like your Social Security number, bank account data, or client information could put you at risk for identity theft if they fall into the wrong hands.

A secure and eco-friendly option is to use a professional shredding service. Proshred®, for instance, offers efficient on-site shredding that ensures your discarded documents are destroyed completely and securely. It’s a simple way to avoid future headaches while clearing out the clutter.

 

Tips to Stay Organized for Next Year

Why stop at organizing for this tax season? Start a system now to make next year even easier. Here are a few quick tips to keep things simple moving forward:

• Set up a file system with separate folders for income, expenses, and receipts.
• Go digital by scanning documents and storing them in a secure cloud-based system.
• Schedule routine check-ins to organize your files quarterly, so you’re not drowning in paperwork come next April.

 

Final Thoughts

Preparing your taxes doesn’t have to be a stressful event. By knowing what to keep, what to save, and using secure disposal methods for the rest, you’ll be one step ahead in getting your taxes done. Whether you’re a seasoned filer or tackling taxes for the first time, a little preparation goes a long way.

And remember, dealing with your old documents? Don’t hesitate to call a shredding service to handle it professionally. Here’s to a smooth and stress-free tax season!