1. Decide which storage system works for you
For financial document storage decide whichever system that you select must fit your style, or you’ll never stick to it. There are essentially three options to choose from: keeping paper files, storing electronic files locally and storing online files in the cloud. Here’s a tip: If you need to track something down during tax season (or at any time), you should know exactly where to look—and be able to find it in one minute or less. Determine where that will be—you’ll be doing your future self a huge favor.
2. Electronic files: what to remember
More and more people are adopting an electronic filing system for all the pragmatic reasons you might imagine. They take up less (literal) space. They are easily searchable and they are retrievable away from your home. If you have everything stored electronically (or online), keep a list of account numbers, usernames and passwords locked in a fireproof safe at home.
- Ninety-two percent of tax returns filed in 2017 were submitted electronically1
- Experts estimate that data stored in the cloud is actually more protected than on your hard drive.2 Just ensure your passwords are strong and refrain from accessing sensitive accounts when working on public Wi-Fi.
3. Always have backup
For the important stuff, you should always have a backup copy kept in another format. If you opt for a paper filing system, save electronic copies (PDFs) to your local computer. If you have electronic statements saved, back them up to the cloud in case something happens to your computer. Just make sure both of your methods are simple and secure.
1 “U.S. Taxpayers efiled More Than 128 Million Returns in 2016,” April 26, 2017, efile.com
2 “Should you store your data in the cloud?” April 19, 2016, Malwarebytes