Once we start de-holidaying our houses, some of us get really ambitious and begin tossing everything, especially those ratty collapsing boxes filled with old files and reports, boxes that take up far more space than they should. And yes, these are the very same boxes we can’t find when we need them, either.
The thing is, we probably need to hang on to more of this stuff than we really want to. There’s always the chance that the information can be retrieved electronically (for a fee), but that isn’t always practical. Gathering together financial records is a slow and pretty thankless task and having to order, and then wait for, reports and statements makes it even more painful. And sometimes we don’t remember what we’ve lost or tossed in the first place. You can’t readily download a report whose sender you don’t remember or whose existence was never confided to you in the first place.
The best solution, then, is to systematically save and store whatever paperwork you might need as it comes in. This is especially true if you are also caregivers, looking after your parents or other elderly relatives or loved ones. It’s hard enough to organize our own stuff under deadline pressure, let alone someone else’s! Step-by-step works best. And you can always scan the documents and forms and archive them electronically if that suits you better than maintaining paper files and folders.
Here are the documents you should keep a lookout for, and file safely away:
Tax returns and supporting documents. Keep anything related to taxes for at least seven years. Here’s why: the IRS has three years from your filing date to audit your return. You have the same amount of time to file an amended return if you’ve made a mistake. The IRS, however, has six years to challenge a return if it believes you under-reported your income by 25 percent or more. And if you fail to file, or file a fraudulent return, there is no time limit on when the IRS can pursue you. In addition to your tax returns themselves, keep documentation of income, charitable contributions, mortgage interest, retirement plan contributions and any other tax deductions taken.
Retirement plan statements. These arrive quarterly, as a rule, and you should keep them until you have received your annual statement. Be sure everything matches up – errors are not that rare. If you are sure the numbers are okay, shred or safely destroy the quarterly statements. Keep your annual account summaries until you close the account for good.
IRA contributions. Have you made an after-tax contribution to an IRA? Keep your records indefinitely, then, to prove that you have already paid the taxes on that money when it comes time to make any withdrawals.
Bank records. You are doubtless already doing this, but be sure to keep any checks or statements related to your taxes, business expenses, mortgage payments or home improvements.
Medical bills and records. Hang on to all medical invoices and the supporting documentation (cancelled checks, credit card statements, receipts) until you are absolutely sure the bills have been acknowledged as fully paid by you or your insurance carrier. If you plan to deduct unreimbursed medical expenses on a tax return, keep the supporting documentation along with all health-related bills. These include expenses for the dentist, vision care and contacts, hearing aids, over-the-counter medications and so on.
Bills. Keep the bills until you receive the cancelled checks or credit card statements showing that the payments were received and credited correctly. And hang on to bills for major purchases, for jewelry, art, appliances, furniture, computers and so on, so that you can prove the value of these items to your insurance carrier should they be lost, stolen or destroyed in a covered disaster.
Credit card receipts and statements. Keep your receipts until you can match them with the statements as they come in. Once you’re comfortable that everything matches up, toss the receipts, but keep the statements for seven years if they document any expenses related to taxes.
Paycheck stubs. Back to the match-up thing. Keep your pay stubs until you get your annual W-2 form(s). Check everything over, and if things don’t match, be sure to request a corrected W-2 from your employer(s).
House/condo records. Keep any and all records documenting the purchase price and cost of improvements, along with records of expenses incurred in buying and selling a property for seven years after it is sold.
Special thanks to Sheri Samotin, founder of Lifebridge Solutions, a Certified Professional Daily Money Manager and contributor to Agingcare.com.