How to go paperless this tax season: 5 tips for paperless tax preparation

The IRS transitioned to paperless taxes with its paperless processing initiative. The transition speeds up tax return processing times, allows for quicker refunds, and helps reduce tax filers' carbon footprint. 

Each year, the IRS receives over 200 million pieces of paper and spends $40 million to store 1 billion paper documents. Let’s look at how to go paperless this tax season, including the benefits and best practices: 

Paperless tax basics: What you need to know

The IRS plans to digitize paper returns, allow for digital correspondences, and make popular nontax forms available digitally over the next couple of years. Here’s what to expect:

• For the 2024 tax filing season, taxpayers will be able to go paperless when filing nontax forms (such as annual filings), responding to notices, and submitting correspondence to the IRS. With this change, the IRS says that 94% of individual taxpayers will no longer need to send mail to the IRS.
• For the 2025 tax filing season, the IRS will start processing all paper tax returns digitally. This means that if you file via paper, the IRS will convert the form to a digital format. This will allow the IRS to process returns faster and speed up refunds. It also plans to process half of all paper-submitted nontax forms and correspondence digitally.

Paperless taxes vs. e-filing

Note that going paperless for taxes isn’t the same as electronically filing your small business taxes. Electronic filing (e-filing) is submitting your tax returns electronically to the IRS or state tax agencies. Note that some states require paper filing for state returns. 

Going paperless encompasses a broader approach, which includes digitizing and organizing all your:

• Tax forms and documents
• Receipts
• Tax records
• Notices from tax agencies

E-filing is a necessary step toward going paperless. However, going paperless for tax season involves a more comprehensive approach to digital recordkeeping.

Tips for going paperless this tax season

Transitioning to a paperless tax process can seem overwhelming, but with the right preparation, it can be seamless. Here are five tips to help you go paperless this tax season:

1. Create a list

Tax season can be overwhelming. Paperless filing will help, but so will having a solid checklist to ensure you have everything ready when it’s time to file. A small business tax prep checklist can help you organize and save time. 

Use a list to request digital-only tax documents from companies and organizations that send you such documents. For example, you can opt out of receiving paper copies of investment or bank statements and get them digitally. If you have online accounting software like QuickBooks Online that integrates with your bank account, you can simply import your statements or transactions.

2. Get a digital account with the IRS

To go paperless on tax day, one of the most important steps is to get a digital account with the IRS. With a digital account, taxpayers can enjoy the convenience of filing taxes online and accessing tax documents digitally. You can also respond to the IRS correspondence or notices electronically via your account. 

To create a digital account, visit the IRS website, and they’ll guide you through the process of setting up an account. 

3. Use your phone to capture receipts

There are some tax-related documents that you won’t be able to get digitally, such as certain printed receipts. As soon as you get a paper receipt or tax-related document, save it digitally. Many mobile phone applications allow you to scan and save paper documents.

4. Store documents in the cloud

Cloud software is one of the best ways to store tax documents. Cloud applications not only let you digitally store tax information, but they also make it easy to sort and search. 

Plus, many cloud applications can integrate with your mobile device, allowing you to scan and save a document to your cloud seamlessly. Cloud software will also allow you to quickly share tax information and documents you need to give your accountant for small business taxes. 

5. Embrace online tax prep software

Consider using online tax software that offers e-filing capabilities. This simplifies the tax preparation process and allows for secure electronic submission of your tax return to the IRS. 

Also, user-friendly mobile tax apps like QuickBooks allow you to file your taxes from the comfort of your smartphone or tablet. These apps provide a convenient way to enter and submit your tax information digitally, eliminating the need for paper forms and manual calculations.

Why you should go paperless for tax season

Going paperless for tax season can offer a range of benefits that make the entire process more convenient, efficient, and stress-free.

Here are five reasons why you should consider going paperless this tax season:

• More secure: With paperless tax prep you don’t have to worry about documents getting lost in the mail or stolen. You can get electronic tax statements and correspondence sent directly to your email. And you can e-file securely while reducing the chances of tax penalties.
• Less clutter: You can say goodbye to the hassle of organizing stacks of paperwork and last-minute document preparation. By digitizing your tax documents, you can easily access and review them anytime, anywhere, using your computer, tablet, or mobile device.
• Time saver: Going paperless allows you to streamline the tax filing process, saving you time and effort. It eliminates the need for manual data entry, reducing the chances of errors and ensuring greater accuracy in your tax return.
• Faster refunds: When you go paperless, you’ll get your tax documents quicker, so you can file your taxes sooner. Couple that with e-filing, and you’ll see quicker processing times, reducing the wait time for tax refunds. 
• Environmental benefits: Going paperless for taxes also contributes to a greener environment. By reducing the need for physical documents, you can decrease paper waste. A digital approach to your taxes aligns with the IRS's paperless initiative to promote a more sustainable and eco-friendly approach to tax filing.

One of the easiest ways to achieve the eco-friendly benefit of paperless taxes is to opt into the electronic delivery of as many tax or deduction-related documents as possible. 

Best practices for storing paperless tax documents

Once you have a plan for going paperless for taxes, it’s time to figure out how to store tax documents. Organization and document management throughout the year can save you even more time.

Here are five best practices for storing paperless tax documents:

1. Organize and name folders: Create a clear and logical folder structure to categorize your tax documents. Use descriptive file names that include the tax year and type of document. For example, "2023_deductible_expenses.”
2. Save documents as PDFs: Convert all your tax-related documents into PDF format to ensure compatibility and maintain the integrity of your files. Use the "Save as PDF" option in your document software or online tools for easy conversion.
3. Utilize secure portals: When sharing your tax documents with your accountant or small business tax service, use secure portals or encrypted file-sharing services. This ensures the confidentiality and privacy of your sensitive information, protecting it from unauthorized access.
4. Implement backup and storage systems: Invest in reliable backup systems, such as external hard drives or additional cloud storage solutions, to safeguard your digital tax documents. Regularly backup your files to prevent data loss due to hardware failures or accidents.
5. Practice document management: Develop a routine for organizing and reviewing your tax documents. Remove unnecessary or outdated files, and maintain a record of all necessary support documents. This will make it easier to locate and retrieve specific documents when needed.

By following these best practices, you can effectively store your paperless tax documents, ensuring easy access and security when filing your taxes. Stay diligent in your document management practices to streamline the tax filing process and reduce the chances of errors or missing documents.

Find peace of mind come tax time

Tax time is stressful enough. Learning how to go paperless for tax season can be an easy way to lower stress during tax season while minimizing your environmental impact. You can further streamline your eco-friendly tax-filing experience with accounting software like QuickBooks Online, which makes e-filing tax forms easy.