It’s true. As you get organized to do your taxes, you probably won’t find anything as helpful as a manila folder — or, to be more precise, three manila folders. You can label them: income; deductions; and medical deductions.

What should you put in these folders? Let’s take a look.

• Income folder:
   This should contain all the records of your income from earnings and investments. Use this folder for your W-2 forms (wages) and your 1099 forms (interest and dividends). This is also the place for your year-end bank and brokerage statements, mutual fund reports and any other documents related to earnings from savings and investments.

If you’ve sold any stocks during the year, you’ll also want to put your 1099B forms in the income folder. However, these forms only indicate your sales price. To calculate your taxable gain or loss, and to determine whether short-term or long-term capital gains rates apply, you’ll also need the paperwork or canceled checks showing when you bought the stocks and how much you paid for them.

• Deductions folder:
   It’s important to keep track of all your itemized deductions, because they can significantly affect the amount of taxes you’ll owe. Your biggest deduction will probably be your mortgage interest, so save your Form 1098, which contains this information. And, save the receipts for your charitable contributions, personal property taxes, real estate tax payments and state income tax paid.

You may also incur a lot of un-reimbursed business expenses. Keep tabs on everything else that’s work-related such as tuition for classes, books, office supplies and computer equipment will likely be deductible. If you work out of your home, you can deduct a percentage of your mortgage payments and utilities. (To learn more about deductible business expenses, request IRS Publication 17.)

• Medical expenses:
   You can’t deduct your medical bills unless they exceed 7.5 percent of your adjusted gross income. That may be a high threshold to cross, particularly since you can’t deduct medical costs reimbursed to you by your health insurance provider. Nonetheless, it might be worth your effort to keep records of the various medical expenses you incur, such as out-of-pocket hospital costs, lab work, dental and eye care costs, prescriptions and insurance premiums.

It may seem like your manila folders will be stuffed to overflowing by the time you’re ready to work on your taxes or hand them off to your tax provider. But over the years, you’ll learn which documents, forms and receipts you need to keep and which ones you can “weed out.”

After you’ve filed your taxes for the year, you may want to keep all your paperwork around in a more permanent binder. But, when the next tax season rolls around, it will once again be time to put those manila folders to work.

(Editor’s Note: Pam Piper is with one of the South Kitsap offices of Edward Jones. Reach her at (360) 871-9707.).