Monday, February 14

LGO #4: Record retention!

A day late and a dollar short. Or in my case, two weeks late and $14 short? Anyway, I am proud to announce the arrival of Let's Get Organized #4, Record Retention!

So once you've developed your paperwork file, you're done, right? No such luck. Even without considering the upkeep involved with continued filing of paperwork, you still have to consider what to keep and what to purge within your paperwork files after a certain period of time.

Some of this is personal preference. I like to keep my Roth IRA account statements, because even though I don't need them, I like to look at them and give myself a pat on the back for saving. My hunky hubster likes to keep his schoolwork and notes, because he is still in school and wants to be able to reference them if necessary.

On the other hand, some of this retention is "required" based on tax laws and audit periods. I put "required" in quotes because you aren't actually "required" to keep the paperwork, but the IRS, for example, can audit back a given number of years based on your situation. Listed below are periods of limitations for various tax situations. The period of limitations is the period in which you can amend your tax return or that the IRS can assess additional tax. (courtesy of the IRS).

1.     You owe additional tax and situations (2), (3), and (4), below, do not apply to you; keep records for 3 years.
2.     You do not report income that you should report, and it is more than 25% of the gross income shown on your return; keep records for 6 years.
3.     You file a fraudulent return; keep records indefinitely.
4.     You do not file a return; keep records indefinitely.
5.     You file a claim for credit or refund* after you file your return; keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.
6.     You file a claim for a loss from worthless securities or bad debt deduction; keep records for 7 years.
7.     Keep all employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.
Some other good information (courtesy of Good Housekeeping):

1.     Keep Investment Records as long as you own the securities, plus 7 years. You need them to prove capital gains and losses. .
2.     Keep Bank Statements one month, unless they are the only record for a tax-related expense. Otherwise, bank statements are only needed to check the accuracy of the charges.
3.     Keep Retirement Plan Statements for one year (tax purposes). The exception to this rule is that you should keep Roth IRA statements until you retire to prove you already paid tax on this income (Note from Barbara: Yay! I win by default :-).
4.     Shred credit card statements IMMEDIATELY after checking for accuracy (unless they are your only record for a tax related expense.) Credit card statements are prime source for identity theft.
5.     Keep pay stubs for one year until you receive your W-2.
6.     Keep bills for one year for tax purposes.
7.     Keep W-2's until you begin claiming social security. They are your best estimate of your earnings and entitlements.
Now there are many different interpretations for all of the above information. Unfortunately, there is no real hard and fast rule. Fortunately, many of these documents are available online these days.

Again, this is one of those systems that you will need to develop based on your personal situation. If you currently have a financial advisor, they might be a good source of information to develop a system that works for you.

Check with your bank. Most banks offer online banking and electronic statements. Your bank can also tell you how long you can access statements online. You may decide to download them and keep a copy. You may find it helpful to know how to access this information, whether you use it or not.

So, that in a nutshell is a starting point for record retention. Here is a snapshot of the system I use at my home:

1. Bank statements - I get these online and only retain them online. I also follow my bank account regularly online to ensure that all of the charges are correct.
2. Credit card statements - again - I get these online and only retain them online. I also follow my credit card regularly online to ensure that all charges are correct.
3. Roth IRA & Other Investments - These I keep forever, because I like to look at where I started and where I am. I am working on switching over to e-statements, and at that point, I will keep an electronic file.
4. Home Loan and Ownership Paperwork - I am currently keeping these forever. Definitely as long as we own the house. We currently sold a house, so I am in the process of figuring out what needs to be kept and what needs to be shredded.
5. Educational Records - Transcripts and diplomas go into the career catalog to be discussed on Wednesday (yes - I will keep to that schedule - career catalog is a much earier subject for me.) Schoolwork and notes go into record boxes and hanging files until my hunky husbster finishes school. At that point, certain coursework will be maintained in a more permanent file, but the general notes and homework will get purged.
6. Tax Records - Right now I am of the 7 year purge mentality. But 7 years ago, all I had was a job. Now I've got a job, a husband, a husband's job, school payments, house payments, investments, etc. I will probably reevaluate my system in a few years when those things start to fall into the chopping block.

So that is kind of a snapshot of how my system works. Again, everyone's system will be a little bit different, depending on your situation. Best advice I can give is talk to your financial advisor, if you've got one. Do a little research with your bank to see what they maintain. Think about what you have and how it affects your life.

Does that help? Or just make it worse? I think next week after the career catalog post, I am going to focus on life skills. Because that is what I need to develop :-) For instance, we are trying to learn to menu plan, with the ultimate goal of being one of those once a month cooks. It may be a while before we get to that point, but maybe at least once a week or once every two weeks (fingers crossed!).

You should see our home. We live in 599.92 square feet. Yes. Less than 600 square feet. I know because I measured, because I am trying to find a better furniture layout. So the house is a SHAMBLES! Which is why, next week - moving on up to life skills. I might even share some pictures of the shambles!

Anyone have any pointers on what works for them for managing the paperwork beast? I'd love to hear them!

:-) Have a great Monday! Barbara

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Hi! I hope you've had as much fun reading about my adventure as I have had writing about it! I would love to hear from you! :-) Barbara

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