COLUMBIA, Mo. – Do-it-yourself tax preparation, for complicated returns, means shuffling though statements, receipts and other records. Your record-keeping system for tax-related documents can be as simple or complex as you want.
While color-coded, alphabetized records may be appealing to some, it isn’t really necessary to overcomplicate record keeping.
“A great example is a deck of cards,” said Andrew Zumwalt, family financial education specialist for University of Missouri Extension. “If you’re told to find the five of spades, do you put the whole deck in order and then find the card?”
If you think about it, how often to you actually have to go back and search through past tax documents? A box with a folder for each year is good enough, Zumwalt said.
So, you have your record-keeping system, which might be simple, complex or anything in between. Zumwalt suggests that you keep those tax records for at least seven years, just to be safe, legally.
If you’re storing important documents in boxes or files, that means storing paper copies of everything. There’s a disadvantage in keeping only physical copies of necessary papers. If some type of disaster occurs, such as a storm or fire, those important pieces of paper can be lost forever.
“You might want to consider scanning important documents like tax returns, birth certificates, and insurance policies and put them in the cloud on the Internet. Personally, I use Google Docs,” Zumwalt said.
If you need past tax returns and haven’t saved any copies, there are a few ways to recover them. The firm that prepared your taxes might have a copy, or you can ask for a transcript from the IRS, Zumwalt said.
There is such a negative connotation associated with tax returns that we can’t wait until it’s okay to get rid of them. According to Zumwalt, that’s a missed opportunity. There’s no reason why you can’t keep your returns indefinitely, because they do have historic value, he said.
“There’s a lot of information there that can help someone who’s trying to research the family tree, or trying to determine what life was like back then. There’s just a lot of history there,” Zumwalt said.