What to keep and shred

(BPT) – Whether you use old-fashioned manila filing folders, a flash drive or cloud storage, tax and personal finance authorities agree on the importance of saving tax documents and records. In addition to using the information for preparing your next income tax return, it may come in handy years from now.

Organizing and saving information throughout the year will cut tax return preparation time and can even save you money. Save any information related to:

• Income from wages, dividends, interest or business: Forms W-2, 1099, and K-1, bank statements, brokerage statements

• Deductions and credits (child care expenses, medical and dental expenses, business use of home, charitable gifts, vehicle sales tax, alimony): Receipts, invoices, mileage logs, bank or credit card statements, canceled checks

• Home and property: Closing statements, invoices, proof of payment, insurance records, receipts for improvements

• Investments: Forms 1099 and 2439, brokerage statements, mutual fund statements

While you don’t need a fancy or hightech organizing system, you do need to keep the information in a secure place. Consider saving electronic copies to the cloud or on a backup storage device in addition to, or in place of, your paper files.

“One of the key advantages of going digital is that your tax information is better protected from natural disasters,” says Dolmage.

Apps and websites make digitizing documents easy. TaxACT DocVault is a free mobile app and website specifically designed to create and save secure, digital copies of tax documents.

At tax time, import DocVault images into TaxACT Deluxe to save with your return. Certain documents should be saved longer. “Information related to your home, property, investments and retirement plans should be kept indefinitely,” says Dolmage. “If you dispose of an asset, be sure to keep the information for another three years.” Business owners should keep tax information for at least four years. That includes employment records, gross receipts, invoices, bank statements, proofs of purchase, asset records, databases, emails and even voicemails.

Refer to IRS Publication 552 at www. irs.gov for more information about tax recordkeeping, Publications 583 and 463 provide specific information for businesses. Visit www.taxact.com/apps to download TaxACT DocVault for free.