Tax returns boxes of receipts and paper

If the paper monster has you buried under an avalanche of receipts, bank statements, ATM slips, investment records, paycheck stubs, and bills—the good news is you can probably throw most of it away without worry when you have a simple record keeping routine.

But before you fire up the shredder, you need to know what to keep and for how long.

tax-returns-piles-paper-records-paper-monster

Toss all you can

Monthly

Once you have recorded the amounts and reconciled your bank and credit card statements, you can shred ATM receipts, bank deposit slips, credit card receipts and sales receipts at the end of each month.

Exception: Keep receipts for purchases that may be tax deductible, those that involve a warranty and any item whose replacement cost exceeds the deductible on your homeowners’ or renters’ insurance.


MORE: Best Inexpensive Shredders


Yearly

Once you receive and reconcile your W-2 against your final pay stub you can toss your paycheck stubs for the year, along with monthly credit-card and mortgage statements, phone and utility bills and quarterly and monthly investment reports.

The same goes for other statements that detail the entire year’s activity on the final end-of-the-year statement.

Keep what you must

Three to seven years

Hang onto the following for at least three years: Year-end statements for credit card accounts, mortgage statements, investments, W-2s and 1099s that recap the year’s activities, canceled checks and receipts for deductible expenses, retirement account contributions, charitable donations, child-care bills, mortgage interest and all other items that support your income tax filings.

The IRS has three years to examine your tax return for errors and up to seven years if there’s a reason to suspect that you underreported your gross income.

Until all possible audit windows close, you should retain all documents that support and pertain to your IRS filings.


MORE: To Shred or Not to Shred?


Indefinitely

Keep tax returns for the long haul and receipts for major purchases and home improvements as long as you own them.


RELATED: The Case for Keeping IRS and State Returns Forever


In the event of an insurance claim, you may need to prove the purchase or your heirs will need to know how much you paid to determine the profit for tax purposes.

Forever

Birth records, military records, marriage and divorce records, death records, education and employment records, medical records, lawsuits, and family history documentation should be kept forever.

Pick a spot

If you don’t have a designated place for important paperwork, it’s going to end up in piles all over the house.

The secret to taming the paper monster is to designate one room, corner, drawer, cabinet or closet where you can store all of your bills, current records, and paperwork. You’ll need a trash can, file folders, some kind of box or container to hold them and a place close by to write.

Keep all of your important papers in this one place and if you will be keeping it for more than one month, create a file folder. One folder might be labeled “Tax deductible,” another “Insurance,” and so on.

Stick to it

Get into a routine of tossing what you can, then file the rest. Keep your system simple and you’ll be more likely to stick with it.

You don’t need to spend a lot of money to get organized. Four boxes with lids plus a good set of markers make a dandy system. Label the boxes: Three Years, Seven Years, Active/Indefinite and Forever.

You’ll be amazed at the difference a little organization will make in your life. You’ll be less likely to misplace bills, miss payment deadlines or forget to take valuable tax-deductions. But the big payoff will come in the peace of mind.


PREVIOUSLY: 6 Ways to Stop Throwing Rotten Produce in the Garbage


We are a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for us to earn fees by linking to Amazon affiliated sites.

Print Friendly, PDF & Email