2nd Annual Clutter Challenge Week 1

Paperwork Storage and Retention

It's Week One of our 2nd Annual Clutter Challenge, and since tax day is nearly upon us, we thought it would be a good time to discuss what exactly we are meant to keep and for how long.

According to the IRS Guidelines (updated on their site February 2016), here's what you should keep with regard to tax returns:

  1. Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.
  2. Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.
  3. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
  4. Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
  5. Keep records indefinitely if you do not file a return.
  6. Keep records indefinitely if you file a fraudulent return.
  7. Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

What's the best way to store these records? And why is fire-proof storage important?

At CMFTO, we recommend using a fire-proof storage system if your records are not also stored somewhere off-site (say, with your attorney) and can be easily retrieved. In fact, even if you have your own copies in your home, they should also be kept in a fire-proof safe. This applies to all of your important legal documents.

In today's day and age, we rely heavily on the digital world for managing our lives, and this includes our legal and important tax documents. One of the ways you can do this is to have your service provider (attorney, accountant) save your scanned documents to a thumb drive, which is then stored in your fire safe, in addition to their office.

When it comes to your most important documents (wills, trusts, deeds, tax returns, passports, etc.) it's important to know where and how these documents can be easily accessed, not only in the event of an emergency, but also for your descendants should the unthinkable happen.

Leaving behind clean, well-organized (and safely stored) documents is one of the best things you can do for your family. Not only will it save on time and hassle, but it will make clear your intentions and wishes at a time when you may not be able to speak for yourself. 

Finally, what do you do with documents that are no longer needed?

Shred them.

Many of the individuals and organizations who assist you in document preparation (such as banks or attorneys) offer document shredding as part of their service. Often, in the summer, banks have shredding days. It's worth finding out if they can accommodate you. If not, we often refer clients to 3rd party shredding companies when cleaning out their homes. On site shredding by one of our providers where documents are shredded at your door and a certificate is supplied by the shredding company is the easiest. It's important to ensure that your personal information is not made available when editing your file cabinets.

This month, set aside some time to review your documents and make a plan for updating, storing, and/or shredding them, as needed. It might take a day or two, but the peace of mind knowing that your most important papers are correct and safely stored will be well worth it. 

All my best,

CMFTO makes your job easier!

Claudia McLaughlin, Founder
312.420.1221 or claudia@cmfmclaughlin.com

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CMF Transitional Organization

710 11th Street, Wilmette, IL 60091