Especially as we get near the end of the year and into tax season, the question always comes up of what records you should keep and which ones can go away. In our “paperless society” (ha!), this is especially important because pretty much no one wants to keep a bunch of old files if they don’t need them.
The IRS has an opinion and yet I don’t really think it gives enough information for you and me. So today let’s cover our butts with the IRS (and anyone else) who might want some of that old paperwork.
First, let me give you some of my general tips for simplifying your record-keeping:
- Sign up for e-statements. Less paper, online delivery, online reporting (if needed).
- As much as possible, pay your bills online. If you want to “print” the confirmation, download something like CutePDF (free) to save a record of the confirmation of payment.
- Keep a simple filing system for everything else. I use an accordion binder with some basic categories for each of the major bills I might get. For example, I have one for health/dental insurance that combines all the different types of paperwork that might fall in there. Don’t have too many categories here.
- Once a year (usually in February or March) I review every paper bill/receipt/etc. in my files and weed out those I no longer need (more details below). What’s left should be everything I need to file taxes and hang on to for the IRS and anyone else.
With those basic tips, let’s discuss how long to keep everything.
- Utility bills – keep the last one you paid. If the lights are on and water is running, you are probably safe.
- Rebates – keep the paperwork until the rebate comes. It has saved me a few hundred dollars to keep that stuff for a while.
- Warranty paperwork – keep until the warranty is expired or I no longer have the product.
- Auto Repair – keep all paperwork until vehicle is sold. New buyers LOVE to see complete records on maintenance, etc.
- Mortgage paperwork – keep the last bill you paid, along with any/all additional paperwork they send (except privacy notices and things like that). When we had a mortgage I put that stuff in my tax file each year JUST TO BE SAFE.
- Credit Card or other similar bills – keep the last bill you paid and, when it is paid off for good, keep the last statement showing a zero balance.
- Anything filed with taxes as income/expense – keep for at least eight years. Why? Because the IRS says to keep it for at least seven. Usually our tax package and a copy of the final returns ends up taking up no more room than a large mailing envelope. I keep eight of those envelopes in storage, then when a new one comes in, an old one comes out and is destroyed (usually burned).
There really isn’t more to it than that. For those of you who are pack rats…LET IT GO! For those of you who refuse to keep anything, shame on you! It will cost you money one day. In all seriousness, don’t let the concern over keeping these files stop you from making a simple plan for your files and implementing that plan TODAY.