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Document Retention - Hilton Head Monthly, April 2008

Are you buried in your own paperwork? Long distance moves, downsizing and spring cleaning can cause us to ask, “Will I ever need all this stuff? And, if I do, how will I ever find it?” Alongside the box of old holiday lights and outgrown children’s clothes are boxes upon boxes of cancelled checks, receipts, bank statements and income tax forms going back to your first job and that first tax filing you did by hand. After all, it’s easier to keep everything than sort, make a decision, and discard or re-file. But when you reach that point when you can no longer store it all, it’s time to decide – what can stay and where; what must go and how to safely dispose of private information.

The Internal Revenue Service has issued new more extensive retention guidelines; tax payers will have to save more papers for longer periods of time. For example, any passive loss documentation must be kept for three years after the losses have been used. Tax payers with non-deductible IRAs will have to hold on to all the records as long as the IRAs are in force. Documentation on the acquisition and capital improvement of primary and secondary residences must be retained to reduce capital gains tax on sale.

Importance, security and accessibility are the considerations when putting together a new document storage system. A cabinet, file or desk drawer may be sufficient for less important paperwork, but all valuable or irreplaceable documents should be stored in a fireproof lockbox, safe or safe deposit box. (Remember that there are restrictions on what may be removed from a safe deposit box if the owner dies.)

 

The following documents need permanent retention and inclusion within your highest priority and safest storage:

Forever

  • Adoption papers
  • Articles of incorporation
  • Automobile titles
  • Birth Certificates
  • Bonds and stock certificates
  • Citizenship papers
  • Contracts and leases
  • Death Certificates
  • Deeds & titles
  • Divorce decrees
  • Household inventory
  • Marriage Certificates
  • Mortgage documents
  • Patent records and trademarks
  • Personal Health Records
  • Social Security audits
  • Tax exemption certificate
  • Veteran’s papers
  • Wills

Ten years

  • Business contracts and
  • financial records, particularly regarding employee records

Seven years

  • Federal, State and local tax returns and supporting documents
  • Corporate and business tax returns
  • Vendor and employee contracts
  • Options records (expired)
  • Inventory records
  • Expense analysis records
  • Invoices and cash receipts
  • Payroll, social security, and W-2 records
  • Leases (expired)
  • Personal bank statements and cancelled checks (checks that support other taxes or transactions should be filed together with that transaction)
  • Property damage reports, accident reports and accident release forms

Five years

  • Sales commission reports
  • Employee business expenses

Three years

  • Appliance warrantees (except those with longer guarantees)
  • Expired automobile warrantees
  • Expired insurance policies
  • Employee applications
  • Terminated employee records

Two years

  • Duplicate deposit slips
  • Routine Correspondence
  • Pay stubs – reconcile with your year end income report, then discard

 

New businesses are emerging that document your belongings and store the information for you on computer disk. This is a good alternative to the household inventory or videotape. A local example is homerunners@islc.net. You’ll need a good quality shredder as well. As an alternative, our company, the Bedminster Group, and many other financial services providers are making their shredding equipment or service available to their clients.

The foregoing list includes business as well as personal documents so you may not have many of the documents listed. For specific situations consult your CPA or check “ask a CPA” at www.skocpa.com. In general save any paperwork that is still useful for tax or legal purposes. And remember, “If in doubt, don’t throw it out!”

Elizabeth Loda, CFP, and Steven Weber are senior investment advisors for The Bedminster Group.

 

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