Wise counselors advise us to let go of the past, but there are records that you need to keep!
What can you shred and what documents should you retain? When can you dispose of receipts, cancelled checks, etc.? There are tax and medical records, and various other records that can make your life easier if you keep them organized and easily available.
Flash drives and cloud storage can provide options besides paper files for many items. In case of a fire, burglary or disaster, digital storage can be invaluable. You may also need to produce documents for proof of income for social security benefit disputes, for insurance applications and claims, and for lenders and creditors.
Starting with tax documents, listed below are some time guidelines for retaining records.
For 3 years after the April 15 deadline, keep tax return forms, schedules, and all information that supports your tax forms. The IRS has three years to audit returns.
For 4 years, keep the documents above if you file taxes in a state that charges a state income tax and has four years to audit your return.
For 6 years, keep your W-2 and any 1099 forms. The IRS has 6 years to contact you if you did not report income.
For 7 years, keep all information regarding losses from worthless securities, stocks, and bad debts.
Note: There are no time limits for records that you would need to produce if you did not file a return or filed a fraudulent return! It is important to retain cancelled checks and records that pertain to length of ownership and any improvements or expenses to your home that would reduce the taxes on the profit of your home when sold. These records could be important for other purposes, such as insurance claims.
Explanation of benefits (EOBs) from insurance companies and Medicare, in addition to records of medical expenses paid directly, should be retained for various times and for various reasons. For 1 year, keep medical EOBs to compare bills, to verify deductibles met, to detect any discrepancies and to determine if you have paid enough to qualify for a medical tax deduction. You can shred any bills or EOBs paid in full if you do not qualify for a deduction and you are no longer under treatment for a particular condition.
For 2 years, keep any outstanding EOBs and bills for another year, if you are still receiving treatment for a condition. Repeat this process each year for outstanding bills and EOBs.
For 5 years, keep medical records for serious conditions that have been treated and cleared.
For 7 years, keep records for medical tax deductions that you have claimed.
Keep indefinitely records for chronically ill patients. You can create a health history with these documents that are useful for medical professionals’ current treatment plans. Only by the direction of the executor of a deceased patient’s estate, can related medical bills and records be destroyed.
What are some documents that you should have and keep in a safety deposit box? Birth certificates, marriage certificates, divorce papers, death certificates, citizenship papers, adoption papers, military service records and any other government or court ordered documents.
A copy of a will should be kept at home for easy accessibility and one in a safety deposit box, while the original remains in the attorney’s safe who prepared the will. Certificates of securities, government bonds, deeds, automobile titles, leases, patents, copyrights, and any other important business or financial papers should be stored in a safety deposit box. You can even deduct the cost of a safety deposit box if you keep investment property documents or securities in the box!
After determining what records can be destroyed, you are now ready to have a shredding party. Invite a friend or friends, provide food, drink, music and the largest shredder you can find (or use multiple shredders).
Help stop identity theft, free your home of extra clutter and, most importantly, have fun!
For more information, see the websites listed below. Additional Resources:
www.publications.usagov/epublications/keeprecords (Keeping Family/Household Records) www.publications.usa.gov/USAPubs.php?PuubID1139 (Where to Write for Vital Records) www.taxact.com/apps www.exilelifestyle.com/throw-shred-party https://www.tesh.com/articles/shredding-parties-can-help-you-fight-identity-theft/