Many of us have stacks of old bills, bank statements and paycheck stubs waiting to be filed or stored. It can be difficult to decide which personal files should be kept and which can be safely discarded. By following a few simple guidelines, you'll be able to clean out your files and keep only those records that are truly important.
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There are some records that should never be thrown out, such as divorce degrees, a will or living will, IRA information, 401(k) records, military records, prenuptial agreements, adoption paperwork, IRA contributions, proof of citizenship, naturalisation paperwork and birth, death and marriage certificates. It is a good idea to keep these documents in a fireproof safe or in a safe deposit box in a bank. While you don't have to keep the following items forever, you should keep them in a safe or safe deposit box while they are current: passports, alimony arrangements, child custody agreements, insurance policies, employment contracts, deeds and stock certificates.
For years, the standard answer for how long to keep tax information has been 7 years, but according to the Internal Revenue Service (IRS), how long you keep a document depends on the expense, event or action recorded by the document. The IRS suggests that you keep records until the period of limitations for a particular return ends. Audits are usually conducted within 3 years of filing a return. If you fail to file a return, underreport your income or include fraudulent information, there is no time limit as to how far back the IRS may go in examining your tax records. If you owe additional tax, the IRS recommends that you keep supporting records for at least 3 years. Should you need to take a bad debt deduction, you'll need to keep records for 7 years.
Keep cancelled checks and bank deposit slips until you receive your bank statement for the month. Old bills can be thrown away when you have proof that your payment was received and has cleared your bank. Shred credit card receipts when you receive your monthly statement, unless the receipts can be used for your tax purposes. When you receive your W-2 each year, destroy your paycheck stubs or direct deposit copies for that year. Keep documents relating to home repairs for as long as you own your house, as they can be used for tax purposes when you sell your home. Don't throw out copies of medical insurance statements, bills and cancelled checks for at least 1 year. You may need them if a medical office claims that you have not paid your bill.
While saving sentimental items won't help you at tax time, you'll want to keep those items safe too. Don't forget to add old love letters, your children's first teeth and copies of special photographs to your fire safe if losing those items would be distressing to you.
Make sure you shred all personal documents before you throw them away. If you don't, thieves can go through your garbage, find account numbers and use this information to buy items on your credit card or empty your bank account. .
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