Every year when tax season arrives, frenzy arrives soon after. The rush to gather all tax-related documents is on. At this time of year, more than any other, the question undoubtedly comes up about what paper documents to keep and what can be let go.

 

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   Keep or Toss?

While tax return prepartaion may be the most common reason to prompt the need to have important documents at the ready, there are plenty of other instances when it's just as necessary. In the case of a disaster like flood or fire, easy access is essential. If you become ill, or are caring for a family member, knowing where to find things like insurance policies or power of attorney is one less stressor to worry about. And you'll certainly want to be able to grab your passport and go!

Of course, you'll need a good filing system, whether paper or electronic, to get started. Think of the various categories of documents you have and how you refer to them so that you can label them in a way that makes sense to you and most importantly, makes them easy to retrieve.

Keeping documents is the easy part; knowing how long to keep them can be confusing. Lots of people fear getting rid of paper documents, and this often results in keeping everything - just in case. It is possible to throw away some of that paper, or delete, when you apply a few guiding principles.
 Holding Pattern

 The IRS is the gold standard when it comes to document retention guidelines. The IRS doesn't     mandate how you keep information as long as its available to answer any questions that might   be flagged on your tax return. The same rules apply to both hard copy and electronic storage.   The general rule is to keep tax returns for three years to comply with a possible audit, and for   seven years in the event that substantial errors are found.

 

 In terms of which documents should be kept for how long, categorizing by length of time provides   a framework.

 

 Temporary storage 

 Hold on to credit card and bank receipts until you receive the next applicable statement. Once   reconciled, these can be shred unless they are needed for tax purposes, then the three-year rule   applies.

 

 1 Year

 Pay stubs, quarterly investment statements and other financial information that you receive on a   regular basis throughout the year should be kept until reconciled with the annual statement.

 

 As long as you own it +3

 Documents supporting ownership of personal property, real estate, vehicles, and investments fall   into this category. Hold these until the loan is paid off or transaction completed plus three years   to comply with IRS audit guidelines. Insurance policies should also be kept for the life of the item,   replacing with renewals as often as the policy dictates.

 

 Forever more

 This category includes all kinds of personal identification: birth, death and marriage certificates,   Social Security cards, life insurance and benefit plans information, estate plans and the inventory   of your safe deposit box.

While this is by no means an exhaustive list of all the documents you many encounter, it offers a place to start thinking about what paperwork you need, and for how long to keep it. 
Importantly, these suggestions are offered as an ORGANiZiNG strategy and bear no resemblance to financial advice. Of course, consulting with an accountant is the best idea, especially when it comes to documentation needed for tax purposes.

Happy ORGANiZiNG,

Nancy Patsios
everyday  ORGANiZiNG