Have you or a parent been keeping paperwork from years past and now you’re buried in it? Do you keep it? Do you throw it away? Should I be shredding? Paper or electronic files?…..
In the past it was thought that we needed to keep every document we came across, every receipt, bill copy with the check number or confirmation number written on it, pay stubs, and canceled checks/duplicate copies. Do I really need all of my old tax returns?
There are many things to consider when decluttering and sorting through all of your paperwork:
Think practical. Unless you are the CEO of a major corporation you will most likely not require a large filing system. A two-drawer filing cabinet or smaller should be sufficient. Sometimes bigger is not always better. Going with a bigger filing system can only encourage you to store “stuff” that you don’t need for your paperwork!
Be Safe. Get a small fireproof safe to store your most important documents (i.e. social security card, passport, estate planning documents, life insurance documents, safe deposit box info AND the key, birth/death certificates, marriage certificates, and divorce decrees). You never hope disaster could strike, but be prepared to save yourself from further distress.
Keeping it Together. Try to keep your paperwork in one central location. Don’t have stacks and folders throughout different parts of your home. Save yourself the trouble to searching all of your designated areas and keep in one room, one cabinet.
Paper is Preferred? If you prefer having hard copies of all of your paperwork, that’s okay! Take all of your paperwork and organize it. Use that large kitchen table to make your piles by sorting everything. Each pile should have its own designation (i.e. bank statements, receipts, retirement statements, medical reports, explanation of benefits statements, house financial, insurance). You can then tackle each stack – According to Consumerreports.org, you should keep these sort of items for one year or more. You can organize each stack by year if you really want to get super organized, keep each year in a file folder labeled with the year or just organized in the stack. You separate out your insurance documents (one file for homeowners, one file for auto, and one file for health).
Living in a Paperless World. A lot of people today are looking at scanning documents to save space and keep as much of their paperwork to a minimum. You can use a flatbed scanner or a small portable scanner. You can scan in your documents, but don’t forget to back them up! Sure you can always store your documents or back them up on an external hard drive, but keep in mind those items can crash too! So whether you choose to store on your computer’s hard drive, external hard drive, or a cloud based document storage service, do your homework and make sure you have the proper security measures in place to protect your identity.
Don’t Become a Statistic. Identity theft is no joke. It can happen to anyone. Always be cautious when sorting through documents that you no longer need to keep that you are not tossing away paperwork with any personal identifiers on them such as a social security number. This can lead to much heartache if your personal information gets into the wrong hands, so always be sure to look carefully at each document. It’s always good to be proactive in protecting your identity by purchasing identity theft protection such as LegalShield who will monitor any changes in your credit and help keep your identity from being stolen.
Hit the Shredder. Have you stumbled across a lot of documents that you no longer need, but you know they need destroyed? You can invest in a small paper shredder and there are few types to choose from so, do your homework when selecting one. If you don’t want to purchase a shredder, office supply stores will offer a service and charge based per pound to shred your documents for you.
Use your Best Judgment. Use your best judgment when determining how long you should keep documents. Remember everything today is electronic! Tax returns are probably the most important documents to have a good filing system on. The following information is from the IRS (www.irs.gov):
“Periods of Limitations that apply to income tax returns:
- Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.
- Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.
- Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
- Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
- Keep records indefinitely if you do not file a return.
- Keep records indefinitely if you file a fraudulent return.
- Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.
The following questions should be applied to each record as you decide whether to keep a document or throw it away.”
You can always consult your local income tax preparer for more information and guidance or call your local IRS office.
So at the end of the day, don’t drown yourself in a pool of papers! Declutter your paper mess, organize what you are keeping, and give yourself peace of mind that when you or a loved one needs to find something it should be easier to locate!