The folks at the Internal Revenue Service have an uncanny sense of timing. Most of us prepare our individual tax returns just as the clocks spring ahead and the calendar says that the Vernal Equinox will bring longer and warmer days. To celebrate, clean out the cobwebs, fire up the shredder, prepare to hit the delete button and get ready to clean up your financial life!
The following is an updated list that I have provided in the past of what you need to keep and for how long you need to keep it. If you have any question about whether or not to hang on to something, err on the side of being a hoarder. That said, in the digital age, you may find that you don’t have to cope with bulging files any more. In fact, maybe 2018 will be the year that you go paperless…once and for all!
Bank and Investment statements: If you manage your accounts online, find out for how long your bank/investment company makes your documents available. For those still receiving paper statements, keep them for one year and for taxable investment accounts, flag any confirms of purchases or sales for tax purposes. Hold onto records that are related to home improvements and major purchases until you dispose of the asset.
CAVEAT: If you think that you may be applying for Medicaid, many states require that you show five year’s worth of statements.
Consolidate accounts: Do you have orphan accounts that need attention? By combining them, the resulting higher balance may help avoid fees and even help you get better deals, not to mention, it will help streamline your financial life. The same rule applies to old retirement or investment accounts that are looking for a home. Combining accounts makes it easier
to monitor your entire portfolio and ensure that your money is properly diversified.
Credit card bills: Unless you need to reference something for tax or business purposes, or for proof of purchase for a specific item, you can shred them after 45 days. Like the bank statements, flag those statements that you may need for your taxes, like charitable contributions.
Tax returns/supporting documents: You may have heard three, six or seven years as the length of time you need to keep tax records. Because the IRS has seven years to audit your returns if the agency suspects you made a mistake, I still recommend that you keep your returns and all
supporting documents for seven years. (I hear you groaning!) If you work with a tax preparer, ask whether they will maintain electronic copies of all returns filed.
Medical Records: Given how hard it is to deal with health insurance companies, you should keep medical records for at least a year, though some suggest keeping records for five years from the time treatment for the symptoms ended. Retain information about prescription information, specific medical histories, health insurance information and contact information for your physician.
Utility and phone bills: Shred them after you have paid them, unless they contain tax-deductible expenses.
House Maintenance: Once those tasks are complete, roll up your sleeves and get ready to address Spring-cleaning for your home. Considering that a primary residence is one the largest assets that most people own, putting the time and energy into maintaining it is important. Make a list of items that you need to address, especially those that may have occurred as a result of winter conditions and then determine how you are going to pay for the various projects. After you complete your improvement projects, don’t forget to update your property/casualty insurance.