Best Practices to Organise Tax Documents and Receipts

It’s that time of year again: many locales around the world have springtime filing deadlines. Tax season is no fun… and unless you live in Monaco or the UAE, you just gotta do it.

Best Practices to Organise Tax Documents

Even if you’re using tax software or work with a certified accountant or tax preparer to file your return, you still need to put in some elbow grease, if only to get your bank statements in order and organise your tax receipts for them.

Procrastination can cost you late fees and interest, so it’s worth having a system in place. Ideally, one you use all throughout the year.

Good preparation is half the battle!

Whether you have one income stream or seven, are a student working part-time, a contractor or pensioner, a full-time employee with a side hustle, a SAHM or run your own business: if you organise tax documents throughout the year, you’ll find it makes it easier to file by the due date.

Filing by Category, Folders, Receipts

My own system consists of three main building blocks that you might find easy to adapt to your tax situation:

1. I do preliminary bookkeeping in a spreadsheet on a weekly basis. When we get ready to file before tax time hits, I just share the spreadsheet with my accountant.
2. On the computer, I maintain a tax folder for each year. Each folder has nested sub-folders for different income streams such as capital gains, full-time work, side-hustle etc. These sub-folders contain digital documents such as PDF invoices and electronic paystubs I’ve received throughout the year.
3. I organise any paper receipts, documents, or other tax records that need to be kept in hard copy into a dedicated tax document binder. These are usually papers that must be kept on hand if an audit crops up, but sometimes at the end of the tax year, I find things that can be scanned and stored digitally.

Reconcile and Back Up Records

Once a month, compare your spreadsheet or bookkeeping system with your bank and credit-card statements. Mark anything that doesn’t match, and make sure every income or expense entry that may matter for your tax return has a receipt, invoice, statement, or other supporting document attached to it or filed in the right sub-folder. This catches any missing records while the transaction is still easy to identify, rather than during the rush to file.

Scan paper documents that you need to keep, check that the files are readable, and keep a second copy of your digital records in a secure backup. At the end of the tax year, add the filed return, notices, and any correspondence from your tax authority to the same year’s folder. Retention periods vary by country and by the type of record, so don’t rely on a generic number of years: check your local tax authority’s guidance or ask your accountant. The IRS recordkeeping guidance, for example, says that records should be kept as long as they are needed to support the income or deductions on a tax return.

That’s pretty much it in terms of my tax prep checklist and how I organise tax documents. If you invest two minutes (GTD, anyone?) every time something lands on your desk (a bill, business expenses receipt, payslip, potential deduction, etc.), you’ll have way less of a mess to deal with when it’s time to prepare your taxes.

Unless, that is, you discover you’re missing 1099s on tax day. 😅