For any given tax year, I use just 2 manila folders and an expandable box file to organize our tax papers.

Manila Folder 1: Throughout the year I have a folder tabbed “Tax bin”. All paperwork pertaining to taxes is filed in this folder, as it comes in. Except receipts – these are kept in a zipped cloth envelope.

I file the Tax Bin horizontally in between my 3-ring binders. It stays put that way, is easy to pull out and doesn’t interfere. When tax time comes, I use it to keep all my transitional income and expense worksheets.

Manila Folder 2: After everything is filed with Revenue Canada, I take another manila folder, label it with the tax year, i.e. “2006 Taxes” and put copies of our tax returns and copies of T-slips in there. This is what I file in the expandable box file. When notices of assessment come in, I add them in to this folder.

I end up with a separate folder for each tax year, and a running tax folder for the current year. Not much to it, but I’ve been doing it this way since 1999 – after trying out more complex setups. This is a very low-cost system, and works great for me.