Spring Cleaning for Tax Records and Documents

It can be tempting to keep records tucked away, forgotten until you need them. Often, we end up with lots of records that we don’t need anymore or could be condensed into a simpler form to store and access. If you’re looking to learn more, read on. Plus, our team is here to help if you have specific questions that aren’t covered in the blog.

Why It’s Beneficial

Keeping records and documents can be important – you may need them down the road if you face an audit from the IRS or need to reconcile your accounts. However, if documents are kept for a long time, they can be misplaced or take up space when they are no longer needed. Going through and clearing out your records – be it hard copies or in the digital space every so often can lead to a few benefits: You know what documents you have; you know where they are, and you can take stock of what you can be missing or may need but don’t currently have.

What to Keep and for How Long

While occasionally you may need to keep documents for longer, some basic recommendations are:

  • Keep for 1 year: Pay stubs, utility bills, bank statements, quarterly investment statements, credit and card receipts.
  • Keep for 3 years: Tax returns, medical bills and cancelled insurance policy paperwork, record of home sale, annual investment statements, documents that support income/deductions on your tax return, and record of stock sales.
  • Keep for 7 years: Records of completely paid loans.
  • Keep while in use: Insurance documents, active contracts, property records, stock records, records of retirement plans, property tax records for disputed bills (until it is resolved), and home improvement records.

You’ll likely face other documents and wonder if you need to keep them or not. Likely, if you need it for your return or to support a deduction on your return, keep it for at least 3 years. For other documents and records chat with your CPA or bookkeeper to decide.

What Can Go

Many banks and other financial institutions, and even workplaces, offer digital versions of many documents that get mailed out to you – think bank statements, W-2s, etc. If you have confirmed that you have a digital copy of a record you also have a hard copy of, you can likely safely discard the hard copy. Know where you have the digital copy saved and where to access it again if you need it. This can allow you to clear up some clutter while keeping those important documents handy. You can also consolidate items, such as donation records or business receipts, into a digital document or record. That way, you don’t have to keep track of mounds of receipts for years on end.

Another benefit of digital copies of records is that they can make your life easier during tax season. With the rise of online client portals and e-filing with the IRS, being able to directly upload digital documents without having to scan them can save you time.

Ways to Store Records

You’ll need to find what works best for you, but some options include:

  • Home safe
  • Deposit box (especially for important documents such as marriage licenses, birth certificates, etc.)
  • Filing cabinet with labels
  • Labeled folder saved to your computer

Need Assistance?

Our team at LeMay & Company can give advice when needed. Our staff can help guide you in deciding what documents to keep if you are unsure. Plus, our website has several resources for you to lean on, along with our client portal. To contact us, call us at (703) 912-7862, email us, or schedule a meeting with one of our team members. You can also check your state’s taxation website or the IRS website to learn more about specific recommendations for where you live.