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Tax Season 101

5 Steps to Simpler Record-Keeping

What bills, ATM slips, and receipts you should keep―and what you can toss.

By Diane Harris
0004home-deskChristopher BakerRealSimple.com

Step 1: Toss Verified Receipts and ATM Slips


Nearly all of your financial papers can be divided into three categories: records that you need to keep only for the calendar year or less, papers that you need to save for seven years (the typical window during which your tax return may be audited), and papers that you should hang onto indefinitely.

For instance, do you really need to save all those ATM-withdrawal receipts? No. Once you've checked the information as it appears in your online account or on your monthly statement,  you can throw away the ATM slip. The same holds true for deposit slips and credit-card receipts. Don't keep sales receipts for minor purchases after you've satisfactorily used the item a few times or the warranty has expired. Keep receipts for major purchases (any item whose replacement cost exceeds the deductible on your homeowners' or renters' insurance).

Shortly after the end of the calendar year, you will probably be able to throw out (or more safely, shred) a slew of additional paper, including your paycheck stubs, monthly credit-card and mortgage statements, utility bills (if they are not needed for business deductions), and monthly or quarterly reports from brokerage and mutual-fund companies for the previous year.

"Typically the entire year's activity is listed in detail on your final, end-of-the-year statement, making every other statement redundant," says Ed Slott, a CPA in Rockville Center, New York. Your final pay stub and W-2 form, for instance, document all your earnings for the year if you work for someone else; if you're self-employed, your 1099 forms do the same for you. Similarly, most investment companies and some credit-card issuers send out comprehensive statements in January. "Keep the monthly updates until you reconcile them with the year-end summaries," says Slott.

 

 
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