When you get ready to meet with your tax advisor, have your receipts organized by category, along with any other relevant documents such as W-2 forms, 1099s, sales journals, bank statements, rent receipts, canceled checks, investment records, documents relating to the sale of real estate or lawsuit settlements, and so on. If you aren’t sure if a document has tax implications, bring it to the meeting and ask your tax pro.
One technique for organizing your records is to have one envelope for charitable contributions, another envelope for tax payments, etc. Add up all the expenses (without double counting) and put the sum of that category on the outside of the envelope. Those will be the numbers you give to your tax preparer. This approach saves tax preparation time (and fees) while providing supporting documents for easy retrieval.
In addition, having your data organized in this manner may help you respond to an IRS challenge. If you’re asked to justify your deduction for investment expenses, for example, you can simply produce the documents in the appropriate envelope.
