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Jul 2019
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July 10, 2019

Do I Need to Keep This Piece of Paper?

Spring Cleaning Your Files in 4 Steps

Hopefully, you have finished your spring cleaning by now and your taxes are filed for another year. That makes this a great time to turn your attention to cleaning out your file cabinet and those boxes of papers that are cluttering up your home office, basement or attic. 
 
Sound like a daunting task? Tackle these steps slowly, using an hour here and there as time permits.
 
1. Categorize your paper
Documents (digital or paper) to be kept usually fall into one of six categories. Note: You do not need to keep most documents in paper form, even for the IRS. Rather you can scan them and save them electronically.
 
Common Documents and Retention periods:
 
Keep permanently
  • Birth certificates
  • Adoption papers
  • Social Security cards
  • Passports
  • Marriage licenses
  • Divorce decrees
  • Military discharge papers
  • Death certificates
  • Will, POA, trust documents
  • Inheritance documents
  • Gift tax returns
  • Business licenses
  • Life insurance policies
  • Retirement/pension docs
  • Legal filings
 
Keep 7 years (or more)
  • Tax returns & all documents supporting the income, credits or deductions claimed, including medical bills
  • Certified mailing receipts to show taxes were filed on time
  • Home purchase, mortgage & sale docs – keep for at least 7 years after the home is sold
  • Home improvement receipts & records for larger projects (in MI keep for longer of 7 years or sale of house)
  • Loan papers – until paid off
  • Statements for investment & health savings accounts
 
Keep while you own the items
  • Vehicle loans & titles
  • Property deeds
  • Warranties & receipts
  • Leases – until your security deposit is returned
  • Investment purchase confirmations (to prove cost basis & holding period)
 
Keep for the calendar year
  • Pay stubs until W2 is received
  • Bank statements
  • Credit card statements
  • Medical bills
  • Utility, cell phone, internet bills (for tax purposes if self-employed)
 
Keep less than a year
  • Utility, cell phone and other bills – until payment is processed
  • Bank withdrawal and deposit slips – until verified on monthly statement
 
Keep most recent
  • Social Security statements
  • Annual insurance policy statements
  • Annual retirement plan statement and last monthly statement
 
2. Protect your identity by shredding:
  • Anything containing personal or financial information like name, address, mobile number, SSN, signature, account info or card number
  • Used airline tickets, itineraries, luggage tags
  • Credit reports and preapproved credit card or loan applications
  • Employment papers for previous jobs
  • Pharmacy instructions and bottle/box labels
 
Cross-cut or confetti shredders are most secure. Also look for free shredding events in your area.
 
3. Store documents appropriately
 
Store permanent documents in a fireproof safe or a safe-deposit box. Electronic files containing personal and financial information should be password protected. (Make sure someone has access to your storage areas and passwords upon your death.) Documents can be filed based on the type of document (bills, statements, etc.) or based on how long to keep it.
 
4. Update old estate planning documents
 
As you are filing your documents, consider:
 
  • Has it been more than 5 years since I created my medical power of attorney? If so, health providers may not accept it anymore. You should execute a new one every three to five years.
  • Has it been more than 5 years since I reviewed my estate plan? Make sure it accurately reflects the people that you wish to inherit and administer your estate. Updates may be needed to documents or beneficiary designations to account for deaths, marriages, divorces, etc. 
Of course, if you work at home, own a business, have properties or businesses in other states or have other circumstances, different retention rules may apply. Please contact your attorney with specific questions.
 

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