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Just How Long Must Financial Documents Be Saved?

Tax man"When it comes to financial record-keeping, what should you save and what do you shred?"

The easiest way to stay on top of your finances is simply to "stay on task," the national newspaper USA Today says. In a December article, entitled "Drowning in bank statements, etc.? Here's what you can toss," the author advises you to pay your bills, file your taxes, and save. Doing so puts you in the best position to achieve almost any goal over time. But even if you're organized when it comes to sending the checks out each month, you can still be overwhelmed by the volume of paperwork you get back in the mail. Good news: you don't need many of the documents you receive for tax or legal purposes.

For instance, bank accounts and bill balances can go. There's no real reason to keep those. These update you on balances at a moment in time but don't mean much in the future. Most of these don't need to be kept for more than a year or two, and typically electronic records will work just as well. However, tax-related financial documents are a different story. In the event of an audit, you'll need all the forms from that tax year to prove your return was accurate. The IRS says you should keep all your tax documents for at least three years. This includes your W-2s with your income for the tax year and your Form 1098 mortgage interest statement. If you have a claim for a loss from worthless securities or bad debt deduction, the IRS recommends you keep tax documents for up to seven years. After seven years, the only reason to hang onto tax documents is if you haven't filed a return at all or if you filed a fraudulent return, according to IRS record-keeping guidelines. However, if that the case, you've got bigger issues.

In this instance, the old adage "Better Safe than Sorry" may create more problems than shredding documents. There's the risk of identity theft or fraud if sensitive data falls into the wrong hands. Also, with all that clutter, your important documents may never find the right hands when they're actually needed.

Some documents and records are too important to keep only in a file cabinet or even as an electronic record. If they're lost or destroyed, replacing them could be a major headache. Documents like property deeds, wills, passports, and powers of attorney are some of the items better kept in a bank safe deposit box or fire-proof safe.

WHAT TO KEEP: Tax paperwork, estate-planning documents and pension plan documents.

WHAT TO SHRED. These are typically available online. Go ahead and trash bank account statements, credit card bills, quarterly investment statements, and utility, cable, and phone bills. An added bonus of cleaning up and organizing is this can open the door for important conversations about family finances.

Reference: USA Today (December 21, 2015) "Drowning in bank statements, etc.? Here's what you can toss"

 

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The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.