Know what documents to keep when tidying up

There seems to be a growing consciousness in households near and far around getting rid of clutter thanks to popular books like Marie Kondo’s The Life Changing Magic of Tidying Up. I’ve done it, and it does feel amazing to rid yourself of unneeded and unnecessary items in your living space.

However, there are a few things to keep in mind before sending financial related papers off to the trash heap.

First, never send financial related papers off to the trash heap! As a rule of thumb you should always properly dispose of confidential, personal, and financial paperwork by shredding it or having it destroyed by a service provider. Tax filings contain loads of sensitive information that identity thieves covet. Many financial planning office and attorneys will accept confidential papers from their clients and ensure they are properly handled for disposal.

Regardless of your desire to lighten your paper load, there are some documents you need to retain and knowing which ones and for how long can be a source of frustration.

The Wisconsin Department of Revenue recommends keeping your tax returns as well as all supporting documents that went with the filing until the statute of limitations for the tax returns runs out. This period is different for different issues and can be as long as 20 years if you’re carrying forward net operating losses. A rule of thumb for retention is four years from the due date of the return or the date it was filed (whichever is later). Supporting documents include things like your W-2s, 1099s, credit card statements, expense tracking and mileage logs.

IRS advises that you may want to keep any tax related filings, amendments, and documents longer than that. We generally recommend a minimum of seven years, but more complicated filings or special situations we recommend retaining the documents indefinitely.

Even if you file your taxes electronically, it’s good practice to print out a hard copy of your return and keep it along with the supporting forms, receipts or any other items that were used in the filing. While your actual return may be stored electronically by whatever tax service you use, you never know how long they will keep it or if they will even be in business at the time you might need to get a copy.  Additionally they don’t have your W2s, bank statements, mortgage information, expense receipts and other documentation stored electronically.  It’s suggested to keep these documents in a fireproof safe or filing cabinet. Scanning all the documents and storing them in Dropbox or a similar cloud-based storage is an option.

In your desire to simplify your life by decluttering be sure you don’t overdo it and get rid of paperwork you may actually need to have if the IRS comes calling.

For more information, you can contact the Wisconsin Department of Revenue Customer Service Bureau at https://www.revenue.wi.gov/Pages/ContactUs/customerservice.aspx

As seen in the Racine Journal Times | ToYourWealth | February, 2019