Financial Spring Cleaning - What to Keep and What to Throw

     It’s that time of year, springtime, when the air is fresh and we’re inspired to clean off the winter grime and dust both inside and outside of our homes. In addition to cleaning your home it might be a good time to clean your files and office although doing this after the first of the year is always a good time as well. If you’ve procrastinated like a majority of the US population, springtime is as good a time as any. You’ve already filed your taxes and you are on your way through a new year.

     
     Whether you keep paper copies or electronic files, the clutter you don’t need should be dealt with, but how do we know what to get rid of? How long do we need to keep our financial records?  What should we keep and what can we throw (shred) or delete?  The chart below is one you should keep in your home/office to use every year when it comes time to purge your paperwork. We’ve listed the type of record, length of time you should keep your original paper/electronic copies and why you should keep them.  Again we encourage you to keep this printable handy list in your office or files for future reference when the time for spring cleaning comes again.
      
     For those of you who are computer savvy and receiving electronic files to save on your computer, this would also apply to how long you should store these files. A quick word to the electronic and online consumers, make sure you either back up frequently using an external hard drive or using any one of the many safe online/cloud back-up services that are available. Services such as i-Cloud, Carbonite, Crashplan, Mozy, Backblaze etc are all affordable, good choices and can be an invaluable investment should you find yourself the victim of a vicious virus, hacker attempt or computer crash. Just remember, the more files you keep, the more space is used for storage. In some cases the more space you use can cost you more money for storage, so all the more reason to purge your files. And if you absolutely feel you must keep old files, save them on a zip drive or an SD disk but also remember that technology changes and after a while you may need to transfer that old storage to newer media.

     For those of you who keep paper everything, the potential for identity theft can be significant if you throw whole pieces of paper with personal and private information in the general garbage for ‘dumpster divers’ to find. To protect yourself, you can shred your paper copies with an affordable shredder purchased from any office supply store. Another option is that some of your banks, credit unions and even local city governments sponsor “Shred It” days throughout the year where a reputable document company will be present to shred your boxes of paper for you confidentially. 

          

     Once you have your financial records under control you might find an office under all that discarded paperwork and relief that you’ve avoided being submitted for the next episode of Hoarders! For an interesting look at how to de-clutter your office and your computer check out Jason Fitzpatrick’s “The End-All Guide to Getting Out From Under Your Office Crap”

 

     For a  printable version of this chart click here.

 

   

Record Type	Length of time to keep	Why
TAXES Returns and all applicable receipts	Seven years	You have three years to claim a refund which is measured from the original deadline of the return. There is also a three year deadline from the original filing deadline if you have made a mistake and decide that you need to amend your return.  You may only amend a return no longer than three years old from the tax date it was due to claim a refund. The IRS has three years from your filing date to audit your return if it thinks you may have made honest mistakes. The IRS may also challenge a return as old as six years if it believes you under reported your gross income by 25% or more. If you fail to file or file a fraudulent return, the IRS can go back indefinitely.
IRA CONTRIBUTIONS	Indefinitely	If you have made non-deductible contributions to an IRA you pay tax on those contributions in the year you contribute on IRS Form 8606. Keep your records to prove you actually already paid taxes on this through the years so that when it comes time to start withdrawing your IRA you have the proof to show the IRS you already paid taxes.
RETIREMENT/SAVINGS PLAN STATEMENTS	From one year to retirement	You probably receive quarterly statements from your retirement and savings accounts..  At the end of the year, make sure the quarterly statements added together match your annual statement.  Then, keep only your annual statements and shred the quarterlies until you start withdrawing your retirement.
BANK RECORDS	From one year to permanently	If you receive your checks back and they apply to your tax deductions, pull them out of the statements and keep them. (Refer to Taxes section)  Reconcile your bank accounts and destroy the statements after 10 years if there is no monetary/tax significance.
Record Type	Length of time to keep	Why
BROKERAGE STATEMENTS	Until you sell your securities and they are reported on tax forms	You need to keep purchase and sales information to determine whether you have capital gains or losses at tax time.
BILLS/INSURANCE DOCUMENTS	From one year to permanently	Once a year go through all your bills.  Many are not needed anymore.  Make sure all payments have been traced to your bank statement and then shred.  However, larger ticket items such as jewelry, rugs, appliances, antiques, cars, collectibles, furniture, computers, home improvement should be kept to prove value in case of loss or selling to another party.  The large ticket items are also kept for insurance purposes.
CREDIT CARD RECEIPTS/STATEMENTS	45 days to seven years	Keep your receipts until they appear on your monthly statements then shred.  If the statements have tax deductions then keep them for 7 seven years.
PAYCHECK STUBS	One year	Each year you are given a W-2 at the end of the year for tax filing.  This should match the last stub “year-to-date” columns.  If the last paycheck for the year does not match your W-2, call your employer for a reason.  They may have one or a mistake was made in which they will owe you a W-2C (Corrected W-2) which you will use for the tax filing.
HOUSE/CONDO RECORDS	At least 6 years to permanently	Keep all records of any improvements and purchases such as remodeling, additions and installations.  All receipts from expenses buying and selling your house, commissions and legal fees should be kept as well.  The reason you want to keep a accumulation of all costs associated with the buying and improvement of your home will help reduce any capital gains when you sell you house.  These expenses are added to the value of the home and subtracted against the sale proceeds for tax purposes.
Financial Spring Cleaning – What to Keep and What to Throw Copyright 2013  Consumerwarfare.com

 

For a printable version of this chart click here.