Is your desk overflowing with paperwork? You know you have to keep some of it, but what? Certainly tax returns… Certainly receipts… Certainly investment account statements… Heck, all of it looks important. If you are like most people, you aren’t too thrilled about plowing through piles of paper. Even more, you especially don’t want to do it more than once. The following is a simple way to attack the paper littering your life and burying your productivity.
For starters, know what you are looking at and what its retention guidelines entail. Next, keep only what you need to keep (ideally in clearly labeled and easily accessible folders) and throw the rest into the shredder…or fold it into paper cranes:
- Estate planning documents. Your current signed documents should be retained until you make revisions. Discard non-current documents and drafts of the current documents to avoid confusion.
- Tax Returns and Records. Keep these for seven years, and not just the federal and state returns. You must keep copies of all the documentation for income and the deductions claimed on the returns, as well as cancelled checks or credit card receipts for tax payments. It is recommended that you keep documentation of your earned income until you begin receiving Social Security.
- Retirement accounts. Retain monthly or quarterly statements until the annual statement is received then shred. Retain annual statements indefinitely.
- IRA records. Retain annual statements indefinitely, especially documentation of after-tax or non-deductible contributions which represent the non-taxable portion of the account.
- Real estate/condominium records. Keep purchase information until you sell and then move those records to tax records. Keep receipts that support the cost of improvements to the property for the same periods. Obtain and retain Contractor’s Lien Releases for improvements done by third-party contractors.
- Investments. Retain documentation of the cost of investments until you dispose of them and then move to tax records and retain for seven years. For securities, the purchase confirmation is sufficient. For partnerships, LLCs, and S-Corps retain cancelled checks for all investments and each year’s Schedule K-1 to document tax basis.
- Loans. Keep the loan document until it is paid off, and then move to tax records. You should retain copies of checks or bank statements showing automatic payments. You must also keep the “Satisfaction of Mortgage” document. Keep this document with your home purchase documents in case there is an in issue with the real estate title when you sell the property.
As a crane soars above the water, organized paperwork will help you fly over any financial hurdles that might come your way.