By Dan Sexton
It is amazing how much stuff we accumulate over the years. If you have moved recently, you know exactly what I mean. I sometimes feel like Sisyphus rolling the rock up the hill in that my wife and I seem to be in a perpetual cycle of cleaning out the garage. And what do you think the number one item taking up space is?
I’m talking tax returns, account statements, pay stubs, photos, letters, insurance coverages and every important document under the sun. The questions become how much do I have to keep and for how long? How do I manage it all? Here a few of the things I have learned and done to clean up my little part of the world and maybe, just maybe, help unclutter your life as well.
TAX AND FINANCE RELATED:
- Personal Tax Returns and their related information hold onto for seven (7) years. Related information includes W-2(s), medical payments, 1099 Forms, K-1 and charitable donation records. Essentially any record the relates to the income, deductions, and credits claimed on your return.
- Small Business Tax Returns and the related information hold for the same seven (7) years as above. Depending on the nature of a business longer period might be required or for large corporations longer periods, up to indefinitely, are recommended.
- Bank and Investment Account Statements, generally, contain information used on tax returns and should be stored for seven (7) years alongside the same year’s tax return. However, a year-end statement, alone, could suffice as long it reports earnings/interest for the year. Your bank or custodian may have statements available online. Check your institution’s website and if their statement history meets the mark, you might rely on them to carry this burden and unburden yourself.
- Home Purchase information, for example, escrow closing statement, and information for major improvements and maintenance keep indefinitely or seven (7) years after the property is sold.
- Property and Casualty Insurance Policy or claims made policies, hold onto the current year’s policy.
PERMANENTLY HELD RECORDS
These might seem obvious, but they are worth mentioning.
- Birth and Death Certificates. Photocopies are okay to have in a file cabinet, but certified copies should be kept secure.
- Medical Records
- Trusts and Wills (Estate Documents). Keep a copy available for easy access also consider giving a copy to your executor or successor trustee. The original signature document(s) keep secure in a safe or safe deposit box but make sure someone other than yourself has access.
- Photos/Video of Valuables (collectibles, art & jewelry), particularly if they are insured.
- Life Insurance Policy(s)
- Legal Agreements such as custody, pre & post-nuptials.
MANAGING IT ALL
Knowing what to keep and how long may not be the eureka moment hoped for, there is still a lot to manage and store. What more can be done?
Several years ago, my wife and I purchased a scanner to convert our paper documents into electronic copies that can be saved to our computer. There might be one incorporated into your printer at home. This small investment transformed how we store important information.
My wife is a genealogist by trade and is therefore all about documentation and proof of lineage. She also manages our day-to-day spending. Since buying our scanner she scans everything. Bank statements, receipts, bills, birth records, death records, business cards, pizza box tops, letters and photos, you name it. Well, maybe not business cards.
This practice has radically reduced our reliance on paper and increased the storage space in our garage for other stuff. Thirty (30) page tax returns are now a simple pdf file stored in the cloud which allows access to it no matter where we are. All we need is a cellular connection or wi-fi access to the internet.
Last year we hit the expiration date on the last few boxes of records and it felt great taking them to the shredder.