Tax season is the perfect time to sort through your financial documents, but it can be tricky to know what you should keep versus what it's OK to let go of. Three certified public accountants share their expert tips here:
Kelley Long, a Chicago CPA and personal financial specialist, tries to generate as little paperwork as possible, opting for electronic records instead. "The IRS accepts electronic records," says Long, resident financial adviser with Financial Finesse in Chicago. "There's no need to keep paper. That's the one thing they're modern about."
Long keeps a folder on her computer desktop for the current year's tax documents. If a document comes to her in paper form, she scans it, saves it in the folder and shreds the original. She converts emails documenting charitable contributions and other tax-related expenses into PDF files by choosing the "print" function and then "save as PDF."
Long saves copies of her calendar to help corroborate business-related travel, meetings and other costs. At the end of the year, she downloads her bank and credit card statements into the folder.
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Finally, Long maintains a spreadsheet where she logs each business-related expense. Software such as Quicken or QuickBooks can perform a similar function, but she prefers the simplicity of a spreadsheet. She also has the Expensify app on her phone to record receipts and other business-related expenses on the go.
ShoeBox is another app that can help people keep their tax records together. Clare Levison, a certified public accountant in Blacksburg, Virginia, warns against spending too much time trying out different apps, especially if the learning curve is steep.
"If it's not relatively easy, then it defeats the purpose," says Levison, author of the book "Frugal Isn't Cheap: How to Spend Less, Save More, and Live Better." "You need to come up with a system that works for you, that saves you time and that you'll actually use on a regular basis."
Levison uses a flash drive and Microsoft Cloud for her backups, while CPA Leonard Wright of San Diego recommends Box as a more secure alternative to DropBox.
One app that Wright — who survived four consecutive audits by the IRS — swears by is MileIQ, which automatically tracks the miles you drive based on your phone's GPS. Each trip shows up separately in the app, and users simply swipe left or right to classify each as business or personal.
"We all get busy and you forget to track everywhere you go," says Wright, a personal finance specialist who typically drives more than 70,000 miles a year for his job as a financial adviser with Northwestern Mutual. "This does it for you. It's effortless."