Get Organized This New Year!

12/13/2018

Dear Kim,

Our New Year's resolution this year is to get organized. I made the mistake of going into our family file cabinet and it is a disaster. I have papers from 1989 in there. We have always been so afraid to throw anything way. How long do you hold onto important documents like tax returns and credit card bills?

Thanks,
Tara, VT

 

Dear Tara,

Cleaning out the clutter is a great way to start a new year, but how to decide what to keep and what to toss can be baffling. My recommendation is to get a cross shredder for your purging. You do not want to throw away anything that could result in identity theft. Please keep in mind that due to technology a lot of your paper can be greatly reduced. Some banks keep statements for their clients on line for several years, and credit card companies often have statements on line that can be accessed at all times. Not everyone is fortunate enough to have a computer, so I have compiled some timelines to help you decide when to shred your old documents.

Shredding tax returns tend to make people very nervous. The rule of thumb is to keep those returns along with receipts and all other supporting documentation for 7 years. The IRS can audit a return up to six years after filing, if they suspect you failed to report more than 25% of your gross income. You can be audited at anytime if the IRS suspects fraud.

Read More: New Year Resolutions, How To ‘Plan Your Work And Work Your Plan.'

Certain documents should be kept forever; I advise that you keep them in either a safe-deposit box or a fireproof safe. You may also want to consider scanning these documents into a cloud.  These documents include birth certificates, passports, social security cards, wills, marriage licenses, home deeds, death certificates, military discharge records and divorce decrees. I also suggest keeping life insurance and retirement plan information in your safe-deposit box.

Receipts from the ATM, credit card bills (unless you are using them to support tax filings), and banking deposit slips can be discarded once you reconcile your statements. Paystubs can be shredded once you have reconciled them to your W-2. Insurance cards can be discarded once they have been renewed and you receive the most current card. Investment monthly and quarterly statements can be shredded once you receive the annual statement, which should be kept until you sell the investment. Bank statements should be held for one year, unless you are able to access them electronically, or you are using them to support tax filings.

I hope this covers the majority of your documents. I suggest going paperless by scanning documents to a computer and into a cloud,  where you can print them as needed. If you are unsure about the timeline of a document, do not shred it, send me an email and I will be happy to provide you with an answer.

Happy New Year!
Kim

 

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