Sorting Out Your Tax Documents: Pitch or Keep?
It’s been a while, huh?
Even though dealing with tax season is probably old hat by now, there are some things about taxes that continue to perplex. Specifically, what should you do with tax documents and the supporting paperwork?
Your aunt says to throw it all away after 2 years. Your banker friend says to save everything for 7 years.
So What Should You Do?
Use this handy guide to help you determine which tax-related documents to save and which to pitch:
1. Save tax returns. Many financial experts recommend never throwing away tax returns. They might come in handy in the future when you need to reflect back to determine the cost basis of prior investment figures, if you wish to apply for loans, or if you want to file for disability insurance.
- If you don’t have room to store tax returns, scan them and keep them in computer files. Be sure to back them up, though, in case your computer crashes.
2. File stock and mutual fund confirmations for safe-keeping. Because you’ll likely someday sell your stock market purchases, you’ll need the original information about your purchase of those items, such as when you bought them, how much you paid, and how many shares you bought. As long as you have the stock, you’ll need those confirmations. So save – don’t pitch.
3. Pitch salary pay stubs after the year’s end. If you saved pay stubs all year, it’s okay to get rid of them after you’re sure your W-2 reflects properly the amount you earned. The only exception here is if, for some reason, you need the final pay stub of the year (to claim how much money was deducted from your pay all year for donations to charities).
4. Before you dispose of copies of household bills, ensure you don’t need them. If you have a home office, you’ll likely need your utility bills and other types of receipts to claim the home-office deduction on your tax return.
5. Save credit card bills. Although some financial experts recommend pitching them, many reasons to save them exist. For example, these days, credit card companies often insure anything you’ve purchased with the cards.
6. Expect exceptions to these rules. If you have room, it’s wise to save any important records.
If you take this information into account, you won’t get caught without a receipt you need or using up precious space to store papers you don’t require.
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It just takes small steps girlfriend!