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Tips for Organizing Papers
Now that the hustle and bustle of the holidays are over, it might be a good time to tackle some organizational tasks. One of the most important – and the most confusing – is organizing your personal and financial papers.
The first question is whether you want to keep paper copies of everything, scan the paper copies to your computer, or do both. That can depend on your personal preference as well as on the amount and type of storage you have. You should not keep documents with identifying information somewhere that could be found easily if your home were robbed. And you should not keep paper documents in a damp place like a basement.
To help you get started deciding what to keep, here are some suggestions from experts:
Taxes. According to the IRS, you need to keep your tax records and supporting returns until the period of limitations – the time during which the IRS can audit you -- expires. That is usually three years, with some exceptions: If you file a claim for a loss from worthless securities or a deduction for bad debts, you need to keep the records for seven years. If you did not report income that you should have reported and that income is more than 25% of the gross income you did report or if it’s attributable to foreign financial assets and is more than $5,000, you should keep the records for six years. If you did not file a return or filed a fraudulent return, you need to keep the records indefinitely. And you should keep employment tax records for at least four years. You should keep the records yourself, even if your accountant also keeps records.
Bank statements. Generally you don’t need to keep bank statements more than a year or so. Many people don’t get paper statements anymore; instead, they receive their statements electronically.
Receipts. If you paid by credit card, keep the receipt until you receive your credit card bill, and check the receipt against the bill. For items that you might return, keep the receipt until the return period has expired.
Warranties and service contracts. Keep these until the warranty or contract has expired or until you no longer have the item.
Insurance policies. For home and auto insurance, you usually receive a new policy whenever your insurance renews. Once you have the new copy, you can get rid of the policy it replaced. For life insurance, you should keep the information about your policy indefinitely.
Investment statements. You should keep these until the investment is sold.
Home documents. You should keep documents on your loan and any home improvements you made until you sell your home. You also should keep your deed until you sell your home.
Car title. Keep it until you sell or trade in your car.
Personal papers, like your birth certificate, marriage certificate, divorce decree, will, estate plan, passport, etc., should be kept forever.
Although most documents can be replaced, it can be a time-consuming and sometimes costly experience to do so. To avoid losing documents, keep them in a safe place such as a safe-deposit box or fireproof safe. The main exceptions are your will and estate plan, which you should be sure are easily accessible at the time of your death. If you put these papers in a safe-deposit box that is in your name alone, your heirs could have trouble getting access. You can leave copies with your attorney and with your executor or another trusted person. If you don’t want the executor to see the contents of the will, put it in a sealed envelope.
Finally, once you have decided what documents you need to keep, divide the others into shred and don’t shred piles. You should shred everything that has any identifying information, such as Social Security numbers, bank accounts, etc. If you have a lot of documents to shred, it might be worth calling in a professional shredding company.