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  • Writer's pictureMichelle

Paperwork & Tax Documentation: What to Keep & How Long to Keep It

Tax day is just two months away. While it seems like a while from now, it always sneaks up. As much as we know the date — April 15th — there’s an element of procrastination which comes along with getting papers together. I am pretty organized, and even I find the task of gathering my tax documentation to be somewhat overwhelming. And, if you don’t have a system for organizing papers, the documentation process can also be arduous.

If you’re nodding your head as you read this, I’m here to say — now is the time to take control of the situation. In fact, prior to even gathering your paperwork, I recommend taking stock of your personal paperwork by weeding out what you really need to keep and what can be shredded. And yes, shred it all. Your identity and privacy is critical and tough to reclaim after it’s compromised.

Using Bank of America, Khan Academy and Consumer Reports as references, here is a list of how long you should keep different paper documentation. YI’ve included a thumbnail summary which you can download and reference. You can also talk to your tax accountant as well, if you have further questions. I work with a tax accountant for my personal and business accounting, and she’s a wealth of information and help.

Paper Management What to Keep and How Long to Keep It

1. Permanently

The documents listed below you want to keep forever. In fact, they’re so important that you should consider putting them in a safety deposit box or fire-proof safe. Take inventory once a year and make a list and/or photograph them so that you can reference.

  • Major financial records (i.e. legal filings and inheritances)

  • Social security cards

  • Marriage licenses

  • Divorce decrees

  • Birth and death certificates

  • Life insurance policies

  • Pension information

  • Estate planning documents

  • Tax returns

2. Until Paid Off or Sold

If you have a loan or ownership of something, be sure to keep related initial ownership documentation until the loan or investment is paid off or sold. For instance, keep your initial auto loan documentation until the loan is paid off and you have a title in hand.

  • Mortgage

  • Auto loan

  • Investments purchase confirmations

3.Three to Seven Years

It’s recommended that you keep any tax return documentation for three to seven years, such as:

  • W2s

  • 1099 forms

  • Brokerage statements

  • Charitable donations

While I’m big on less clutter, this is one area where I’d weigh on the side of longer, and suggest keeping for seven years. This ensures you’re prepared in case the IRS decides to audit you years down the road, which unfortunately happens!

4. One Year or Less

Keep any regular financial statements for one year, or until the next statement arrives. You can keep them either digitally or in paper form, but keep them in a place where you can easily access them and they won’t be erased.

  • Bank statements

  • Credit card statements

  • Monthly investment statements

5. One Month

Keep utility and cell phone bills for one month until the next one arrives. For credit card and bank receipts, keep until you’ve reconciled with your monthly statement.

  • Utility bills

  • Cell phone bills

  • Credit card receipts

  • Bank and ATM deposit and withdrawal slips

The exception to this is if you’re self-employed — consider keeping for one year or longer as part of your business tax documentation.

Once you’ve taken stock of what you have, be sure to shred and destroy anything you’re not keeping. From there, create files by type. Label hanging files with the broader topic name, for instance label your hanging file “Credit Cards” and insert folders labeled with each credit card you use, such as “Amex Card”, “Amazon Card”, “Target Card” and so on. Once you create your file system, maintain it regularly — remove and shred old statements, and replace with the most recent versions.

Best of luck this tax season — wishing everyone big returns! What paper management hacks work best for you? Email me or tag The Lighter Home on Instagram with your favorite ideas and hacks.

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