I do a fairly low-tech approach:
- Shred all bills that are not accounts (gas, phone, etc.)
- Keep all records that are accounts or income (credit cards, savings, mutual funds, checking, pay stubs).
- I keep selected receipts for big purchases, and other tax-deductible things (mostly medical expenses)
- Put all paper in a big pile after the accounts are reconciled (I use quicken). Ignore pile as it grows.
- At the end of the year, put the big pile of paper on a table, and sort them in to little piles by account. Sort each stack by date, but this will happen most automatically since you are sticking the most recent stuff on top during the year, and you reverse it when exploding out the big pile. I wind up with 20 or so stacks of paper.
- Put all the stacks into ONE folder, marked with the year name.
- Next year, you stick your taxes in that folder.