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Most people think 1099 forms are the primary documents they need for tax season.
However, bank statements can also be important. Your MIDFLORIDA Credit Union bank statement contains essential tax information, such as:
- Side hustle income and expenses
- Student loan payments
- IRA payments
However, bank statements don’t have all your tax information neatly divided the way 1099 forms do. You have to organize them yourself.
If you’re wondering, “How do I organize my bank statements for taxes?” don’t worry. You just have to follow a few simple guidelines.
Open a Free Checking Account at MIDFLORIDA Credit Union today!
Collect your bank statements
The first step in organizing your bank statements for taxes is collecting them.
To do that, you’ll need to decide in what format you want them stored.
Digital bank statements
Most people only keep digital copies of their bank statements.
Digitization offers many advantages, including:
- Statements are accessible at any time through your online banking platform.
- Organizing digital bank statements is easier.
- Digital bank statements reduce paper waste.
- Copying digital bank statements is easy.
- Storing digital bank statements takes up less space.
Digital copies also have some disadvantages:
- They can be compromised or corrupted by hackers and malware.
- They need to be backed up regularly.
Physical bank statements
Keeping physical bank statements might seem outdated.
However, physical bank statements have some advantages over digital copies:
- Physical bank statements don’t require software to open.
- Hackers can’t steal physical bank statements.
- You can use physical bank statements as proof for loan applications, audits and legal disputes.
Of course, physical bank statements also have disadvantages:
- Paper statements can be lost, stolen, or destroyed.
- Physical bank statements contribute to deforestation and environmental waste.
Categorize your bank statements
Once you know how to store your bank statements, you can start categorizing them.
First, sort out your bank statements by month and year.
Once you’ve done that, you can create subfolders for different types of bank statements.
If you have a MIDFLORIDA Regular Savings account, create a “savings account” folder and put your account statements there.
Creating subcategories
You can create as many subcategories as you like to organize your bank statements for taxes. For instance, you could create another folder for large expenses.
However, you should avoid complicating your file system unnecessarily.
Categorize your transactions
Categorizing your transactions is an important part of organizing your bank statements.
Categorization helps you determine which expenses are tax-deductible and calculate how much income your business earned.
You can also identify the expenses you spent money on in the last year. This can help you plan and budget for the year ahead.
Categorizing transactions is easier if you organize digital bank statement copies.
However, if you take the time to categorize your transactions on physical bank statements, you’ll get a detailed view of your business’s finances that few others will have.
Review your files annually
At least once a year, review your bank statements and dispose of any bank statements you no longer need.
When to dispose of bank statements
You should keep bank statements for between three and seven years.
Usually, you can dispose of personal bank statements after three years. However, you should wait the full seven years before you dispose of business bank statements.
Create a filing system you’ll actually use
Make sure that you'll want to use any filing system you adopt.
This is a very personal choice. A filing system could be recommended by CEOs everywhere, but it might not be a good fit for you.
To find the best filing system, you may have to experiment. Try a filing system that appeals to you and use it for a month. If you’re unhappy with the system, get rid of it and try another.
Any good filing system should be:
- Simple: A complicated filing system can cause people to put off filing. Keep your filing system as simple as possible.
- Adaptable: A filing system should be able to adapt to changes in your finances, such as adding new bank accounts, closing old bank accounts, or adding a new category of expenses.
- Accessible: Your filing system needs to be accessible. If it isn’t, you won’t want to use it. A good filing system should ideally be within arm’s reach of your workspace.
Keep your MIDFLORIDA bank statements organized for taxes
Bank statements have much useful information that can make tax time easier. To get the maximum benefit, though, you have to organize them.
You’ll first have to figure out whether you’ll collect your bank statements as physical or digital copies. Once you have decided on a plan, you can start categorizing your bank statements. You should also organize your expenses, especially the tax-deductible ones.
Once you have your bank statement filing system set up, review it regularly. Dispose of any bank statements that are no longer needed to defend against IRS audits (usually those more than seven years old).
You must first have a bank account to take advantage of your bank statements for taxes. You can get one today by signing up for a Free Checking account online at MIDFLORIDA.
Even better, qualified new members can get a $200 bonus 1 when they open a Free Checking account. 1 It’s a great way to offset the cost of filing taxes.
1. Offer valid as of February 1, 2025, and may be canceled at any time. MIDFLORIDA Credit Union membership and eligibility requirements apply. Paper statements are not routinely provided for Free Checking accounts. See associate for details regarding fees and terms. Minor accounts excluded. To qualify for the incentive, you must open a new Free Checking account online or at any MIDFLORIDA branch with direct deposit ($500 cumulative which must post within 60 days of account opening; Cash transfer app deposits do not qualify); accept and open online banking, eStatement, and a debit card; and complete 5 debit card purchase transactions which must post in one calendar month (to be completed within the first 60 days of account opening). No dividends are paid on Free Checking. Annual Percentage Yield is 0.00%. Limit one incentive per Social Security number. Past checking account holders and previous recipients of checking account incentives are ineligible. The incentive will be deposited to the new Free Checking account within two weeks after all qualifications have been met and will be reported to the IRS. Minimum to open Free Checking is $50.
