While one of my earlier articles gave strategies for dealing with papers as they come in, this article will provide guidelines on how long to save them.
There are some papers that should be kept forever. In fact, copies should be made of these to ensure you have them in the event of emergencies. These include legal papers describing who you are and what you own. Birth certificates, adoption papers, marriage and divorce documents, death certificates of immediate family, social security documents, deeds and titles to property, medical history, retirement and IRA records, driver's license and passports are examples of these items. At least one copy should be kept in a fireproof or waterproof box kept in your home for instant access.
Other papers should be kept for a specific length of time but not necessarily forever:
Receipts or bill of sale and manuals of equipment should be kept as long as you own the item. Warranties or guarantees for jewelry and other significant purchases should be kept with the receipt until the item is lost, sold or replaced.
Insurance policies should be kept for as long as their coverage is in effect.
Medical claims should be kept until the claim is satisfied. Save documents used for tax deductible claims with those returns.
Payroll stubs should be kept until the end of the year and checked against the W-2 forms provided by the employer. If they show funds withheld for charitable organizations such as United Way that are claimed as deductions on your tax return, the end of the year stub should be filed with the tax return.
Tax returns should be kept for 3-7 years unless you have failed to file a return or have filed a fraudulent return. The IRS has 6 years to challenge a return if it thinks you have under reported your gross income by 25%. The IRS has 3 years to audit a return. Keep all receipts and documents relating to deduction claims with the tax forms. This IRS web site link spells out the specifics: http://www.irs.gov/businesses/small/article/0%2C%2Cid=98513%2C00.html
Statements from your securities or brokerage firms should be kept until a new one arrives and the last one when the securities are sold to report a gain or loss. That transaction document should be saved with the tax return.
Bank records and other monthly credit card, installment, utility etc. statements should be reconcilled each month and then may be shredded unless needed for tax return purposes. These institutions have the financial history on computer or micro files should they need to be recovered.
It is important to mention many statements as well as other documents can now be sent online to personal computers where they can be stored in one of many options. This can reduce the paper required for them unless needed for documentation to tax returns.
These are guidelines and suggestions and if you have questions or concerns, you should consult your accountant. Hopefully, they will help to tackle and reduce the amount of papers kept so they are easier to organize. For more strategies please feel free to contact me through my web site: www.OrderlyPlaces.com