Monday, June 20, 2011

Organizing the Tax Records: My Own Story

shredded paper in recycling bin

Tax-related papers. It's easy to be overwhelmed by them, and have them take up an inordinate amount of space.

While you should certainly ask your own tax accountant or tax attorney about his or her recommendations on record retention, I personally follow the guidelines I see most often: Keep the returns themselves forever, and keep all supporting documents for seven years. (That's a general rule; there are exceptions.) And since I've seen conflicting advice on whether or not it's OK to rely on scanned copies, I keep paper originals for all those "last seven years" papers.

tax records in fireproof boxes on closet floor

But even with this approach, I had much more paper than I wanted, or needed — and I wasn't storing it well. For the last couple years I've been using my ScanSnap to make scans of all tax-related papers, and then filing them in my file cabinet — and that worked well. But before then I'd been keeping my tax-related papers in fireproof boxes, and the boxes were taking up room I wanted for other purposes. And the old tax returns, dating back to the 1980s, were taking up room in my file cabinet.

So this past weekend I finally embarked on my "clean up the tax records" project.

Paper reduction: I scanned all the old returns, after blacking out my social security number and my signature. (I don't need either of these floating around in electronic form.) After making sure I had a good backup in place, I then shredded the returns. I have a very full recycling bin this week!

Improved storage: For returns within the 7-year period, I scanned what had not yet been scanned, and put the papers in my file cabinet — in the space that used to hold all those really old returns. Since I have electronic copies, I'm no longer afraid of losing the originals, and see no need for those fireproof boxes.

I'm not quite done with the project, but it's well underway and I'll finish it this week — and then I'll Freecycle all those boxes.

tax files on computer

While all the scanning was a bit tedious, a good scanner (and a good shredder) made things go pretty quickly. And now I have a lot of reclaimed space — and I have all my tax information at my fingertips, in well-organized computer files.


MarySees said...

Well, I haven't keep the returns forever, but I do have them for the last 7 years. Because we are poor, and we don't own much, our records are minimal.

However, everything could be lost in a fire or tornado or flood, so I imagine it would be much better to have it all computerized anyway!

Great going, Jeri! :)

Jessica said...

What is your strategy to make sure the electonic copies are safe and won't get lost if your computer crashes or stolen? I've lost so many things that I thought were backed up when the computer failed.

Jeri Dansky said...

Jessica, I back up to two separate external hard drives using SuperDuper. (I'm on a Mac.) And I also use an online backup service, CrashPlan. With three backups, I figure I'm covered.

Sabrina said...

That is a clever the way you keep your documents. As I am not up for scanning all those pages, each year, I go back the 8th year and reduce down as much as possible and place it in a box that has a number of years in it. One box can hold several years of info after the 7 years.