Settling your account with the Internal Revenue Service each year doesn’t need to be a frantic search for the information you need to file your tax return. Knowing what documents to have at your fingertips can help to reduce filing difficulties and possibly your tax bill.
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Statements mailed in January and February
Most of the papers you need to document the income, interest and withheld taxes you report arrive in your mailbox in January, with investment-related 1099s often coming in February. Although the postal service may deliver some of them—your W-2, for example—email announcements that the documents are available online may land in your inbox.
Mortgage providers, banks and other financial institutions often post those important 1099 forms on your online account. So it’s a good idea to create an email tax folder for messages relating directly to tax information.
Track paperless records as they come
Paperless banking may have turned shoe boxes into receipt relics of the past, while your online statements often contain key backup records for potential deductions such as:
- Charitable donations
- Outlays for health care
- Gambling winnings and losses
- Property tax expenditures include for your auto.
Many of us ignore the line items from these statements until we start our annual tax-filing ritual. But you may save time by taking a few extra minutes each month to jot down tax-related information including:
- Expense title
- Check numbers
- Payee names
- Dollar amounts
Create a spreadsheet dedicated to tax records. Throughout the year, consider downloading and printing online documents that will be available for only a limited time.
Think deductions throughout the year
Keep a mileage log in your car. Jot down the miles when you use your vehicle for:
- business or medical appointments
Keeping track of parking, bus and taxi fares and tolls can also help you qualify for a deduction.
Hold on to cash receipts that document your transportation, charitable work and other tax-deductible activities. Hold on to any paperwork and documents that arrive in the mail, or receipts needed to prepare the return, even if you're not sure. It's always better to have too much information than not enough.
Life events you experience
Documents related to life events should all be saved, such as records of:
- death of a spouse
- deductible alimony payment records
- adoption papers
- child custody agreements
A newborn brings joy into your life and potential tax advantages. When you sit down to prepare your return, have these documents for dependent children close at hand:
- Social Security card
- Childcare receipts
- Contributions to college savings plans
Buying a home presents tax-saving opportunities. New homeowners should keep paperwork such as:
- Closing documents
- Home improvement invoices, receipts and proof of payment
- Annual mortgage statement
It's good to keep your closing documents in case you paid real estate taxes or points when you closed that don't appear on your year-end mortgage interest statement. Home improvements such as wheelchair ramps recommended by a doctor may be deductible as medical expenses if you itemize deductions. Certain energy efficiency improvements also may help you reduce your tax liability.
Remember, when you use TurboTax to prepare your taxes, we'll ask you simple questions to ensure you don't overlook any possible deductions.
Keep your filing history
The value of a tax return doesn't end on the day you file it. You'll likely need to provide this document to get a mortgage, apply for student loans and to check the status of your refund on the Internal Revenue Service's "Where's My Refund?" web page.
Generally, the IRS can audit you for three years after a filing date, and in some cases even longer, so hold onto your return copies and supporting documents just in case. The IRS can audit you as many years back as they would like if it suspects fraud, so keeping tax returns and supporting documents for at least seven to 10 years can put you on the safe side.