Phew! You’ve filed your tax return and satisfied Uncle Sam for another year. Now is a good time for some spring cleaning, and not just for next year’s taxes. Perhaps you’ve hung on to all the “financial stuff,” but much of it seems like clutter. You probably don’t need that shoebox full of old receipts, but where do you draw the line?
Luckily, there are some very clear rules and reasons for what to keep and for how long. These guidelines apply to both electronic records and paper records and cover standards for storage and disposal. Purging old documents and setting up a new financial document system can keep you organized and may make next year’s tax preparation so much easier. A well-organized system could also ease stress during events or decisions that require you to quickly locate important documents.
Let’s begin with two key questions you need to ask yourself when reviewing all of your tax documents: Will I ever need this information in the future? And, How long do I need to keep this? Find your answers below.
Plenty of documents get a “yes,” or at least a “maybe,” to the top-level question of: Will I ever need this information in the future? The next question offers structure for organizing and maintaining your financial records: How long do I need to keep this? Find your answer in the following four categories.
Documents related to major life events, proof of identification, and transactions can be difficult to reproduce and important for a long period of time. Items to keep forever include:
You may have heard that the IRS could audit your tax return as far back as seven years. Generally, audits don’t go past the prior three years; however, if an auditor finds a significant error it may extend further back. The conventional seven-year rule of thumb applies to these items:
You may need to refer to these records over the course of a year:
Save these items just long enough to verify the accuracy of monthly bills and statements:
In this age of identity theft and privacy concerns, meeting high standards for information security is critical when storing or disposing of financial documents.
“The secret of getting ahead is getting started,” Mark Twain once said. How true that is. Organizing financial documents may seem like a daunting task at first, but once you get your system set up, you’ll reduce the time and frustration spent looking for documents and you’ll free up space – a valuable commodity – in your home. Next year, when you are pulling together your tax information, that task will be a snap! Establishing an organized system for documents can pay big dividends when it comes to your financial wellbeing.
Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.
All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors.