What Paperwork Should I Keep This Year?

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Paperwork has a time limit.

Or does it?

With the beginning of each new year, we look around and wonder what to do with it.

For many people, this is a good time to declutter their paperwork.

We all have files.

These could be purchase receipts, tax documents, or official correspondences.

According to a recent AARP Magazine article titled “When to Keep, Shred or Scan Important Papers,” knowing what to pitch and what to keep can be confusing.

You feel overwhelmed with paperwork clutter, but you are afraid to throw anything away.

What can you do?

Paperwork can feel overwhelming.
You do not need to drown in paperwork and records.

Tax documents.

Review your tax returns.

How long do you need to keep these?

The IRS has a taxpayer audit window of three years.

Typically, this is all you should need.

There are some exceptions.

What are they?

If you have a more complex return or are self-employed, you should keep tax records for about six years.

When you purge these files, do not simply throw them in the trash or the recycling bin.

They contain sensitive personal information and should be securely shredded.

Before you shred, you should double check the accuracy of your income on MySocialSecurity.com.

This is easier to do with your tax documents in hand.

If you have done work on your home, you should keep these receipts and records until you sell.

These could help reduce your taxes owed when you sell your home.

Banking and Investments.

The amount of time you need these records depends on your situation in life.

Are you or your spouse applying for Medicaid now or in the future?

You will need to have five years of financial records to prove your eligibility.

What do these include?

You should keep credit card statements, bank statements, and statements from your financial advisors or brokerage firms.

What should you do if you are not applying for Medicaid?

Most banking and financial statements can be purged after a year.

Again, you should keep income-related records longer in case the IRS needs them.

Credit card statements and online banking statements may be able to be accessed for several years through the web platform.

If not, start downloading them while they are available and saving them in a password protected folder on your computer.

For stocks and bond purchases, you should keep records for six years after filing the return reporting the sale of the security.

The IRS may require these records within this time frame.

Once you have deposited your checks, you can shred them as most banks keep electronic versions.

Medical Records.

There are no time limits on medical records.

If you have had serious injuries or illness, these are important for future physicians to know.

You should keep documentations of hospital discharge summaries, treatment plans for major illnesses, and surgical reports.

Any vaccination or immunization records should be kept as well.

Similar to the banking documents, you should keep digital files in a password protected file on your computer or secure cloud-based storage account.

Although your doctor may have digital copies of your records, it is important for you to also keep these documents.

In addition to these records, you should keep your medical payment documents for six years.

The IRS may want to check the validity of your health care deductions.

If you feel as if you are drowning in paperwork, review these guidelines to remove some of the clutter from your life at the start of the year.

Reference: AARP Magazine (August 5, 2019) “When to Keep, Shred or Scan Important Papers”