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Paper Records: What to Toss, What to Keep

submitted on January 20, 2010 by mooncow728 in "Member's Lounge"
You can deep-six most of your documents and go digital with the rest.

Worried about pitching documents that they may need at some point, many people decorate a spare bedroom with boxes or large file cabinets stuffed with old bank statements, tax returns and pay stubs. (Okay, if the stash isn't in a spare bedroom, perhaps it resides in the attic, basement or garage.) As you finish up your tax return this year, take the opportunity to clean house. With a few key exceptions -- mainly tax-related documents -- you don't need to keep all those papers. And if you're willing to use online banking and create a digital archive of crucial records, you may even be able to go paper-free.

Before you dig into those piles of records and statements, invest in a shredder to guard against identity theft. And don't skimp on the shredder, or you'll defeat the purpose of having one. Ribbon-cut models produce bands that can be taped back together. So shell out the money for a cross-cut or confetti model. We like the Fellowes Powershred DS-2 (about $100 online) for its sharp look and munching capability.

What to Keep

The most important documents to hang on to are your annual tax returns. You should keep the actual returns forever, but you can get rid of the supporting documents after three years. That's how long the IRS has to initiate an audit. If you're self-employed, you need to keep supporting tax documents for six years (that's how long the IRS has to come after you). Once the time elapses, toss the records -- and shred any that reveal your Social Security number or other personal information.

Other papers to save for at least three years include thank-you letters from charities and year-end investment statements. You don't need to save your monthly mutual fund reports forever. But before you toss them, wait for the year-end statements and make sure they match up. Also be sure to keep records that show the initial purchase price for stocks and mutual funds so you can calculate your basis when you sell them. After that, you can shred the documents once the three- or six-year IRS window draws to a close.

You also need to save records pertaining to your house as long as you live in it. Records showing your purchase price, and what you spent on improvements, may come in handy when you're trying to prove the value of your home to potential buyers. Another reason to keep these papers: If you sell your house at a hefty profit (more than $500,000 for couples filing a joint return or $250,000 for single filers), certain expenses can be used to lower your tax bill. After you sell the house, keep the documents for three years.

Finally, hold on to records showing how much money went into and came out of IRAs and 401(k)s -- especially if you've made any nondeductible contributions -- so you don't overpay taxes when you withdraw the money. Keep any 8606 forms on which you reported nondeductible contributions to traditional IRAs.

What to Toss


So what can you unload? ATM receipts, bank withdrawal and deposit slips, and credit-card receipts can go through the shredder after you've checked them against your monthly statements. Rebecca Eddy, founder of Eddy & Schein In-Home Administrators for Seniors, says one client kept every single pay stub she had ever received. That's overkill. Just keep them until you get your Form W-2. You can also get rid of paper copies of most monthly bills -- for credit cards, utilities and cable TV -- unless you need them for tax purposes.

If you need help sorting through the clutter, consider hiring a daily money manager. Daily money managers tend to have a background in accounting, finance or law, and they make house calls. You can find one in your area by checking with the American Association of Daily Money Managers. Typical cost: up to $150 an hour.


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  Comments
  • 49871
    reallyrob
    expert
    4 1 1
    Posted by reallyrob on January 21, 2010
    [reply] 10 0
    Thanks! This is really helpful. I really need to start shredding some things!
      49884
    • HouTex
      admin
      Posted by HouTex on January 21, 2010
      [reply] 8 0
      Yeah, that recent $15 + shipping shredder deal from Adorama would have been perfect for this project! Too bad it was a pricing error and they canceled my order! Sad Cry
    • 49892
    • AmruDesi
      novice
      Posted by AmruDesi on January 21, 2010
      [reply] 5 0
      I need a shredder too
    • 49900
    • mooncow728
      professor
      1 1
      12 6 1
      Posted by mooncow728 on January 21, 2010
      [reply] 7 0
      http://www.amazon.com/Aurora-A.....=pd_cp_e_1
      That one isn't a bad deal for $29.99 and free shipping. I have one very similar to that and it works pretty well.
    • 49901
    • AmruDesi
      novice
      Posted by AmruDesi on January 21, 2010
      [reply] 6 0
      Thanks,The reviews are really good. Will keep an eye on it. Hope it drops down price a little Mr Green
    • 49911
    • HouTex
      admin
      Posted by HouTex on January 21, 2010
      [reply] 5 0
      Thanks mooncow728, for posting the topic and the shredder info!
    • 49924
    • arzkar
      professor
      3
      Posted by arzkar on January 21, 2010
      [reply] 3 0
      I agree, I need to start shredding some things too Big Grin
      Thanks mooncow728 Wink
  • 49904
    midget
    professor
    5 3 2
    10 6 2
    Posted by midget on January 21, 2010
    [reply] 4 0
    I shred everything! Better safe than sorry later.
  • 49907
    busant20
    professor
    1
    Posted by busant20 on January 21, 2010
    [reply] 7 0
    This is one of best thread. It's really helpful, thanks mooncow728
      49920
    • mooncow728
      professor
      1 1
      12 6 1
      Posted by mooncow728 on January 21, 2010
      [reply] 8 0
      Thanks! Funny thing is I debated about posting it. I thought it was useful but wondered if people already knew this stuff. It goes back to how when you are a kid you think adults know everything but then you get older and realize that you know nothing and you think "ah crap no one knows anything and we're in charge?!?!" Mr Green
    • 49926
    • busant20
      professor
      1
      Posted by busant20 on January 21, 2010
      [reply] 5 0
      Mr Green Mr Green Mr Green
    • 49929
    • mooncow728
      professor
      1 1
      12 6 1
      Posted by mooncow728 on January 21, 2010
      [reply] 3 0
      If you have Netflix, watch Joe Rogan Live. He goes on about how scary it is that we're all adults. It's pretty hilarious.
    • 50037
    • busant20
      professor
      1
      Posted by busant20 on January 22, 2010
      [reply] 3 0
      I'll check it out Wink thnx mooncow728 Smile

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