What Documents to Keep for Tax Season

Tax season doesn’t have to be daunting. With a little preparation, you can gather the necessary documents and approach filing with peace of mind. Whether you’re filing as an individual, a freelancer, or a small business owner, certain records are essential to ensure your return is accurate and complete. Here’s a clear, straightforward list of the documents you should keep on hand, along with tips for staying organized.

1. Personal Information

To start, you’ll need documents that verify your identity and those of your dependents. These help the IRS confirm your filing status and eligibility for certain credits or deductions.

• Social Security Numbers (SSN) or Individual Taxpayer Identification Numbers (ITIN): Have your SSN or ITIN, as well as those for your spouse and dependents, readily available.

• Photo ID: A government-issued ID, like a driver’s license or passport, may be needed for verification, especially if you’re working with a tax professional.

• Last Year’s Tax Return: This provides context for your current filing, including carryover deductions or credits.

Tip: Store these in a secure, easily accessible place, such as a locked file cabinet or a password-protected digital folder.

2. Income Documents

Your income records are the backbone of your tax return. These documents show how much you earned during the year and help determine your taxable income.

• W-2 Forms: If you’re employed, your employer will provide a W-2, which details your wages and taxes withheld.

• 1099 Forms: These cover various types of income, such as:

  • 1099-NEC for freelance or contract work.

  • 1099-INT for interest earned from bank accounts.

  • 1099-DIV for dividends from investments.

  • 1099-G for government payments, like unemployment benefits or state tax refunds.

• Other Income Records: Keep records of any additional income, such as rental income, side gig earnings, or cryptocurrency transactions.

Tip: Create a dedicated folder—physical or digital—for all income-related documents as they arrive throughout the year.

3. Expense and Deduction Records

Deductions can reduce your taxable income, but you’ll need documentation to back them up. Common deductions include:

• Charitable Contributions: Receipts or acknowledgment letters from charities for cash or in-kind donations.

• Medical Expenses: Bills, receipts, or insurance statements for out-of-pocket medical costs that exceed 7.5% of your adjusted gross income.

• Homeownership Documents: Mortgage interest statements (Form 1098), property tax records, or receipts for energy-efficient home improvements.

• Business Expenses: If you’re self-employed, keep receipts for business-related costs like office supplies, travel, or advertising.

• Education Expenses: Form 1098-T for tuition payments or receipts for other qualifying education expenses.

Tip: Use a spreadsheet or app to track deductible expenses throughout the year, noting the date, amount, and purpose.

4. Tax Credits

Tax credits directly reduce the amount of tax you owe, so it’s worth gathering documents to support any credits you’re eligible for.

• Child and Dependent Care Credit: Receipts or invoices from childcare providers, along with their Tax ID number.

• Education Credits: Form 1098-T for the American Opportunity or Lifetime Learning Credits, plus receipts for textbooks or other required materials.

• Energy Credits: Receipts for energy-efficient upgrades, like solar panels or insulation, that qualify for federal or state credits.

Tip: Check the IRS website for a full list of credits and their documentation requirements to ensure you don’t miss out.

5. Health Insurance Information

Health insurance records are critical, especially to confirm coverage and avoid penalties.

• Form 1095-A, B, or C: These forms detail your health insurance coverage, whether through the marketplace, an employer, or a private plan.

• Proof of Exemptions: If you didn’t have coverage for part of the year, keep records of any exemptions you’re claiming.

Tip: Review your 1095 forms as soon as you receive them to ensure accuracy.

6. Retirement and Investment Records

Contributions to retirement accounts and investment activities can impact your taxes.

• Retirement Contributions: Records of contributions to IRAs, 401(k)s, or other retirement plans, which may be deductible.

• Investment Sales: Brokerage statements showing the sale of stocks, bonds, or other investments, including cost basis and sale proceeds.

Tip: Keep these records for at least three years, as the IRS may request them in case of an audit.

7. Records for Special Circumstances

If you’ve had unique financial events, such as selling a home or paying off student loans, keep related documents.

• Home Sale Records: Closing documents and Form 1099-S if you sold a property.

• Student Loan Interest: Form 1098-E for student loan interest paid, which may be deductible.

• Alimony Payments: Records of alimony paid or received, including the recipient’s SSN, if applicable.

Tip: Consult a tax professional if you’re unsure how these events affect your taxes.

Staying Organized Year-Round

To make tax season even easier, adopt these habits:

• Go Digital: Scan physical receipts and store them in a cloud-based service for easy access.

• Use a Checklist: Create a personalized checklist of documents you typically need, tailored to your financial situation.

• Set Reminders: Note deadlines for quarterly estimated taxes if you’re self-employed or have additional income.

By keeping these documents organized and accessible, you’ll feel calm and in control when tax season arrives. If you’re ever unsure about what to keep or how to proceed, a tax professional can provide guidance tailored to your needs.