Receipts for Valuables: File all receipts for big ticket purchases, such as jewelry and antiques. You may need them as proof of value if they are lost or stolen and you need to file an insurance claim. Also, in the event the IRS becomes more aggressive in the auditing process; you may need these to establish a base cost in the event you sell the item.
Canceled Checks: Many people file canceled checks by date or check number. Here is another alternative: after you balance your monthly statement, separate your checks according to purpose. File all home improvement checks separately and do the same with other tax-related checks, such as medical expenses, charitable contributions, and business expenses. Keep checks that support your business tax returns for six years. It is also wise to hold onto your bank books for six years – in the event of an audit, the IRS may want to review them to examine the sources of your deposits. Generally, many non-tax-related checks can be tossed after a year or two.
File Storage: Your current financial files should be kept where it is easy and convenient to work with them. Papers that are either valuable or difficult to replace – like securities and deeds – are best kept in a safe deposit box or fire proof home safe. But before placing your will and/or trust, life insurance policies, or property deed in a safe deposit box, check your local state laws. Some states seal the box upon the owner’s death, which makes it difficult to retrieve those documents by the surviving relative. You can discard all other documents, including bank statements, canceled checks, credit card statements, deposit slips, and medical bills after four years. It is a good idea to shred these documents before discarding them to help prevent identification theft.
Source: Jock Noyes, FM Lending Services |