Thursday, April 19, 2007

Tip on Financial Documents To Keep - And What To Toss

Tax time is over so we can all begin spring cleaning a little early and throw some of those papers away, right? Stop...put down the papers...walk away slowly... and read this Keep'em and Toss'em list from the Texas Society of Certified Public Accountants.

I would recommend keeping all backup documents for your tax return. Always ask your self, "could I prepare or justify my tax return without this particular document?" If the answer is no then don't trash it. Most say to keep documents for 7 years and then toss them which is probably safe enough. If you don't like having all those pesky paper files around then scan them and burn them to disk. Keep all your scan disks together and make a backup to keep off site. You can then destroy most documents needed for your tax preparation. Other documents you will need to keep the originals on file but I would still make scans of them and burn to disk for easy accessibility and backup in case of a disaster.


Keepers:

# Your will, living will and durable power of attorney.
# Life insurance policies, including policies with your

# employer.
# Insurance, and any death benefits that are due you as a veteran of the armed services.
# Retirement plan documents from your pension, profit sharing, 401(k), and IRAs, along with annual statements.
# Records of nondeductible contributions made to your employer-sponsored retirement savings plan or IRA.
# Separation and divorce documents.
# Real estate deeds, titles and property surveys.
# Military records.
# Tax returns and supporting data for at least the last seven years after the original return is filed.
# For investments, keep buy/sell trade confirmations to show when each security was bought and sold, the price you paid and commission charged.
# Dividend reinvesting statements (for seven years after you file your tax return showing a gain or loss( Receipts for major purchases like jewelry, furniture, etc.
# Receipts for items under warranty until the warranty expires.
# Pay stubs – until the end of the year when you compare the year end totals with the amounts shown on the W2 form you get from your employer.

Tossers:

# Receipts of bank deposits and ATM transactions – once you receive your bank statement and verify that the transactions were properly posted to your account.
# Canceled checks – save only those needed as support for tax purposes.
# Bills – once you’ve paid them and verified that the checks have been cashed.
# Monthly or quarterly brokerage statements – if your annual yearend statement summarizes all transactions made during the year.
# Credit checks on employees (even housekeepers and nannies) – in accordance with Fair and Accurate Credit Transactions Act.

The accountants' final tip: Always shred financial documents when they’re no longer needed, along with destroying pre-approved credit card offers.

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