Is your birth certificate lost among outdated ATM receipts or is your insurance policy buried under last month’s grocery bills? Many of us recognize the importance of organizing our documents to save time and avoid headaches, but simply don’t know where to start. To transform your earnest intentions into exceptional paperwork organization, here are some guidelines on when to discard certain documents. Don’t forget to safeguard your financial information; shred the documents you decide to throw away.
Canceled Checks:
If your financial institution of choice is a reputable bank or credit union, you need not worry about keeping physical checks. Instead of cluttering your storage boxes with canceled checks, banks generally offer online access to both sides of your cleared checks within five business days, and they maintain at least a year’s worth of these digital records. Only print the ones that are needed. If older copies are needed, particularly for legal issues or an IRS audit, it’s possible to obtain them. It’s recommended to keep canceled checks for a year and then discard the ones not needed for tax, warranty, or insurance reasons.
Credit Card and Bank Receipts:
Hold onto these receipts and cross-verify them with your monthly statements. Attach the receipts to warranty documentation for purchases or keep receipts for gifts or items you might return. Furthermore, receipts can prove the value of items for insurance or tax purposes.
Tax Documentation:
In most cases, supporting tax documents such as receipts, W-2s, 1099s, canceled checks, and credit card statements can be discarded seven years after the tax return due date. However, under certain circumstances, longer retention might be required. For instance, if there are concerns about under-reporting your income by 25%, the IRS has seven years to question your return. As for your tax return copies, keep them indefinitely.
House-Related Documents:
Keep records of home improvement expenses until your house is sold; these can help reduce taxable capital gains if relevant. Maintain records verifying the profit from a home sale for three years after the selling year, especially if you roll over any gain into another house. If deducting office expenses, retain phone or utility bills. These bills can also give potential buyers a picture of their potential monthly payments.
Savings and Investment Records:
Keep purchasing and selling records of mutual funds and stocks until the transactions are reported to the IRS, then store them with your other tax documents. It’s advisable to hold on to the latest cumulative reports for each security. Keep quarterly reports from all pension plans and retirement plans until an annual summary is available, and then preserve all annual summaries until the account is closed.
Automobile Papers:
Keep car maintenance records until you sell the car, and then hand them over to the new owner. Retain the purchase documentation and the title as long as you own the vehicle.
Documents to Keep Indefinitely:
