The Annual Post-Tax Document Cleanup

With your taxes filed and, hopefully, a sizable refund deposited into your emergency fund or applied to your outstanding debt, your attention turns to another annual ritual – the shredding of financial documents. Unfortunately, there has always been confusion on your end as to what documents should remain in your file cabinet and which should make their way through the sharp blades of your shredder. To make it easier on you for this year and the ones to follow, here are the guidelines to use when determine what stays and goes.

The Indefinites

Let’s start with your annual tax returns. Regardless if you print them out or store them on your computer, never get rid of these records. Though you may have a clean filing status, you never know when the IRS will decide to perform a random audit on you finances. If that occurs, you want to make sure the original documents are available for retrieval. Same thing can be said for all calculation sheets and schedules that normally come when executing an itemized tax return.

Next on the list are statements for your retirement and brokerage accounts. Even though you receive these records on a monthly or quarterly basis, you want to ensure you keep the annual statements for an indefinite period of time. This helps to not only keep track of investments throughout the years, but assists in determining if any malicious activity, such as unscheduled withdrawals, take place on the account.

Large purchases also need to be kept for an indefinite period of time. When it comes to big ticket items, receipts should be kept until the item is sold or discarded to help if the product needs to be serviced under a warranty or recorded for insurance after a theft or fire. Receipts for the capital improvements made to your residence need to be stored for the time you reside there. If you move, the records can be discarded seven years after the home is sold.

The Seven Year Plan

Besides capital improvement receipts after a home sale, supporting documents for annual or quarterly tax filings can be discarded after seven years. This includes items such as donation receipts, records on utilities for the home office, and tuition bills.

One Year Keepers

If you still receive printed paycheck stubs, they can be thrown out after one year. Same goes for monthly bank, brokerage, loan, and credit card statements. Receipts for health care, whether from a medical office or pharmacy, should be discarded after one year as long as they aren’t connected to any pending claims or lawsuits. Finally, as long as they are not utilized for a home office or a rental property, utility bills can be thrown away after one year.

 

Leave a Reply