Benefits of Digitizing Your Tax Records in 2025

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published January 19, 2025

Tax season is fast approaching, and whether you’re an early filer or procrastinator, there’s one extra step you can take to safeguard your tax documents.

Storing your tax forms and supporting documents in a digital folder can help you file a secure and accurate return come tax time. From travel receipts and bank statements to your W-2, 1099s, or other information returns — having those records at the click of a button can simplify your tax experience.

The IRS announced that the 2025 tax season will start on Jan. 27, and expects more than 140 million individual tax returns for tax year 2024 to be filed in the months leading to April 15, the federal deadline.

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What’s more: Direct File will be available in 25 states, allowing taxpayers to file their taxes directly with the IRS for free. The common thread? It’s all digital, which the IRS encourages as it can ensure faster processing and a quick refund if you are entitled to one.

Here are some tips on how to prepare for the tax season by going digital.

Keep track of your documents

It’s just about that time of the year when you receive your W-2s from your employer, and feel the need to start organizing your tax documents. Depending on your tax situation, you may collect receipts for expenses you’d like to deduct or claim as a credit.

As reported by Kiplinger, one way to prepare before the IRS starts accepting returns is by creating a dedicated digital folder for the following documents:

W-2 forms form employers
1099 forms for freelance or contract work
Paystubs or unemployment compensation
Receipts for deductible expenses
Investment records or banking statements

Also consider life changes.

If you have dependents on your tax return, you’ll also need their Social Security Number. You never know if you may be eligible for family tax credits.

Having those documents stored digitally can relieve you of the headache of misplacing key documents or receipts you may want to deduct later on. It can also prevent accidental losses due to flooding or unprecendented natural disasters.

While you can still recover your tax records and other important documentation, having these documents in a digital cloud or file can ease your worries. It’s worth noting that the IRS has extended tax deadlines for taxpayers in designated areas impacted by natural disasters.

File your tax return digitally

Each year, the IRS encourages taxpayers to file their tax returns electronically. Luckily, there are multiple services that allow you to file your taxes for free directly with the IRS or through the private sector.

Why should you consider filing electronically?

E-filing your tax return is fast, easy, and more secure than mailing a paper return and risking it getting lost in the post.
You can also select to receive your tax refund as a direct deposit, which can result in getting a refund faster.
You can store a completed tax return copy in a digital folder or cloud, for future use or record-keeping.

In fact, the IRS has proactively been working toward offering taxpayers digital solutions to modernize their tax filing experience. As of Jan. 27, eligible taxpayers in 25 states can file their taxes for free with IRS Direct File. The U.S. Department of Treasury estimates that as many as 30 million taxpayers could benefit from the program.

If you’re interested in filing before the start of tax season, IRS Free File is another way you can file your taxes for free. The service is only available for taxpayers with an adjusted gross income (AGI) of $84,000 or less for 2024.

Why is digitizing your tax records recommended?

Switching from paper to digital isn’t just an eco-friendly choice, but a secure way to store your important tax documents and information and prevent the risk of loss or damage.

Keeping all of your personal tax records in one place can also simplify your tax filing process, and motivate you to file digitally. The IRS highly recommends taxpayers to e-file their taxes as it speeds up processing times, and the delivery of your refund if you are entitled to one.

The IRS has been pushing to modernize its tax processing system for several years now, and at the center of it is prioritizing the digitization of required documents to file a return. With the recent loss of another $20 billion in key IRS enforcement funds, there’s no telling how it will impact processing times and the agency’s workforce capacity.

Avoiding paper filing if you can, can be worth it in the long run. With the start of IRS tax season just around the corner, going digital can be a step in the right direction.

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Gabriella Cruz-Martínez is a seasoned finance journalist with 8 years of experience covering consumer debt, economic policy, and tax. Before joining Kiplinger as a tax writer, her in-depth reporting and analysis were featured in Yahoo Finance. She contributed to national dialogues on fiscal responsibility, market trends and economic reforms involving family tax credits, housing accessibility, banking regulations, student loan debt, and inflation.

Gabriella’s work has also appeared in Money Magazine, The Hyde Park Herald, and the Journal Gazette & Times-Courier. As a reporter and journalist, she enjoys writing stories that empower people from diverse backgrounds about their finances no matter their stage in life.