Finances
keeping Your Financial records
Making order out of a mess will keep you ahead in trying times
A
re your file cabinets overflowing? Are you awash in
a sea of old checks, bank statements and pay stubs?
Get organized with a plan that purges the unneces-
sary and ensures you’ve saved what you need to keep the
IRS happy should they come calling.
While it’s tempting to hang onto every piece of paper in
case you need it, there are documents you can go ahead and
get rid of say financial planning experts at the Oregon
Society of CPAs. Reducing that burden will help you be
more organized with the documents you do need to keep.
Why Am i keeping this Stuff Anyway?
There are many reasons to keep records. In addition to tax
issues, you may need to keep records for insurance purpos-
es or for getting a loan. Good records will help you identi-
fy sources of income, keep track of expenses, prepare your
taxes, support your tax return, and keep track of the “basis”
of your property (the actual cost of your home and any
improvements).
• Defined benefit plan documents. These
should be kept forever, even if you no
longer work for the company.
• Estate planning documents. Your will –
you do have a will, don’t you? Powers of
attorney, trust agreements and similar legal
agreements – all are “forever” documents.
Shred it
Don’t worry about hanging onto the fol-
lowing:
• ATM receipts and bank deposit slips.
Once you’ve matched them up with your
monthly statement, let them go.
• Paystubs. Shred as soon as you receive
your W-2 for the year
• Paper copies of your credit card bill
(unless needed for tax purposes)
• Utility, phone and cable bills. You can
ditch these as soon as
your next bill confirms
payment.
However,
don’t throw these away
if you are self-employed
and need these records
for tax deductions.
Shredding is the best option
to keep account numbers and
other information safe from prying
eyes and identity thieves.
Any long-term documents
should be kept some-
where secure, such as a
fire safe box, where they
cannot be ruined by flood
or fire.
Dollars & $ense is a
regular column by the Oregon
Society of CPAs (www.orcpa.org).
What to keep, how long to keep it
IRS Publication 552: Recordkeeping for Individuals is
available on the IRS website and describes basic records
you should keep to prove your income and expenses. You
can use it along with the suggestions in this article to create
your own “Record Retention Plan.” It can be a simple doc-
ument – a checklist – of all the different kinds of paperwork
you have and your decision about how long to keep each
type.
• Copies of tax returns. Keep these as part of your tax
records. They can help you prepare future returns, and you
will need them if you file an amended return. Keep copies
of your tax returns for six years.
• Year-end mutual fund and brokerage statements. Keep
the year-end versions for at least three years after the due
date of your tax return. If you are self-employed and, when
you prepared your tax returns you owed the IRS money,
you should keep all your records at least six years. That’s
how long the IRS has to come back to conduct an audit.
Some financial planning experts advise self-employed
workers to keep all financial records for at least six years.
• Cancelled checks, old receipts. Keep these for three
years after the date of your return, and then it’s safe to get
rid of them. But if you’re self-employed, keep your receipts
for at least six years.
• Receipts for major home improvements. Hang on to
receipts for major home improvements. These should be
kept until the property is sold – they might be needed in
order to show the actual cost of the home in some tax situ-
ations. They may also come in handy if you want to show
potential buyers how much you’ve spent to upgrade the
property.
• Bank records. Go through your checks each year. Set
aside and retain those related to your taxes, business
expenses, home improvements and mortgage payments
according to your record retention plan. You should keep all
bank records for at least a year.
• Loan documents. When a loan is paid off you can get rid
of the documents, but make sure you receive the official
title or deed first.
• Receipts for big ticket items. Receipts for jewelry, rugs,
appliances, antiques, cars, collectibles, furniture, computers
and other expensive items should be kept in an insurance
file for proof of their value in the event of loss or damage.
put these in a “forever” file
• Retirement documents. These include IRA contribution
records. Keep the records indefinitely to prove that you
already paid tax on this money when the time comes to
withdraw.
• Stock and fund purchases records. Keep these for as
long as you hold those investments.
• Life insurance. Policy documents should be kept until
the terms are fulfilled. This means that you should keep
these until you die (or until the term ends if you have term
life insurance).
Enter for a chance to
win $2,500 at
www.theSkanner.com
April 20, 2011 The Portland Skanner page 7