With the start of a new year, I am focusing on clearing the clutter from my home and have been making good progress. But when it comes to the important documents in my home office, I am hesitant to pitch the papers for fear I may need them later on. Is there a certain rule of thumb I should follow regarding such items?
When it comes to personal documents, some keep everything for fear of throwing away something important while others purge more than they should and later may regret it.
The right choice falls somewhere between the two, according to advice provided by State Farm Insurance’s Learning Center on the company’s website.
The goal is managing paperwork and remaining sensible but streamlined.
The insurance company offers the following guidelines for how long to keep documents:
Save forever
Note: It’s a good idea to take the extra step of storing all the originals of legal documents in a safe deposit box or fireproof container since photocopies or scanned images of such papers are usually not considered to be valid.
Marriage licenses, divorce and custody decrees
Birth, death and adoption certificates
Wills, trusts, and financial and medical powers of attorney
Passports and citizenship papers
Military records
“To this category, I would also add educational records such as transcripts and diplomas as well as medical history records,” advises Wayne B. Ball, a partner in Ball & Stuart whose practice specializes in wealth management through estate planning and asset protection.
Save while you own the asset
Property abstracts, mortgage documents, insurance policies and receipts for home improvements
Vehicle titles, purchase or lease documents and auto insurance policies
Receipts, warranty certificates and operating instructions for household items
Stock certificates and retirement plan records
“Some of these records should be kept for the term of ownership plus seven years - specifically for property abstracts, deeds, mortgage documents, insurance policies and receipts for home improvements, and stock and bond purchase and sale documentation - in case of IRS audit,” Ball suggests. “When clients do not have this information it can be very difficult or impossible to re-create and puts the client at risk meeting IRS requirements.”
Save for at least seven years
As a general rule, tax returns can be audited for three years after you file. But that time period can increase to up to seven years if the IRS suspects unreported income or fraud. And those who are being audited are required to produce all supporting documentation. However, the IRS will accept legible electronic records, so make sure to copy everything to a DVD or flash drive and file with other “keep forever” documents. (Remember to delete any tax-related records from the computer’s hard drive as a security precaution.) For more info, check out IRS Publication 552.
“With respect to the records which should be kept for seven years, it’s a good idea to also include bank statements, credit card records, business expenses, and evidence of other deductible items in this category,” Ball says. “We also recommend keeping tax returns for seven years or longer if it has information that relates to an item you still own.”
As a general rule, Ball and his firm recommends also keeping:
Credit card receipts (until verified on the statement)
Dividend receipts (until verified on annual statements and then keep the annual statement for seven years)
Insurance policies for the life of the policy plus seven years in case of late claims
Pay stubs (until reconciled with a W-2)
Other bills (until payment verified on the next bill)
“We also recommend that clients implement a systematic approach to this which will become easier over time,” Ball says, adding that his firm also recommends preserving the originals of all deeds for family history reasons.
“Finding and possibly framing deeds documenting transactions with original signatures by grandparents or great-grandparents is rewarding,” he explains.
Go paperless when possible
To protect private information, sign up for electronic billing on encrypted websites using the https:// prefix. To save more paper and clutter, opt out of junk mail lists. The Federal Trade Commission recommends contacting the Direct Marketing Association to reduce unsolicited mail. Other services, such as Catalog Choice and Do Not Mail, also may help reduce the amount of incoming junk mail. For information on opting out of such mail, go to consumer.ftc.gov and search for “unsolicited” to find an article that explains how to stop unsolicited mail, email and phone calls.
Do you have a decorating or remodeling question? We’ll get you an answer from an authority. Send your question to Linda S. Haymes, Arkansas Democrat-Gazette, P.O. Box 2221, Little Rock, Ark. 72203 or email:
HomeStyle, Pages 39 on 01/18/2014