If you did your own taxes, especially at the last minute, you are no doubt ready to dump the leavings back into their shoebox.
If the run-up to the deadline was a hassle–missing receipts, no help from last year’s returns, confusion in general–then you are ready to get back to real life.
Do yourself a favor: Take an hour or two and put your tax paperwork in order. That shoebox, or whatever you use to achieve a more or less orderly heap, is not your friend. Leave the heap alone now, and you almost guarantee you’ll have the same kind of headaches next April.
It doesn’t have to be that way. Keeping your records in order is a matter of filing, not philosophical inquiry or physics experiments.
All you need to do is set up a coherent system, then make yourself use it. Put the time in now, and you’ll save even more time later. You’ll be able to get the job done without the usual mix of confusion, frustration and remorse.
Just imagine a world where you don’t have to throw away an hour or two looking for all those Salvation Army receipts that are somewhere around the house.
Getting organized is a good idea even if you pay somebody else to fill out your returns. Remember, those guys get paid by the hour.
– First, establish a place for your records. That may be a file cabinet or perhaps an expandable cardboard file. For computerized records, set up a folder in some prominent place. And don’t forget to make frequent backups of your information.
– Check out the returns you just filed. That will tell you what categories you need. You may need a folder for W-2s and other income records, another folder for charitable donations, another for your investments and so on.
– Use a separate folder for each category. Label each one.
– Toss out duplicates. You’ll save confirmations of stock trades, for example, so you don’t need to keep monthly brokerage statements with the same information.
– Stay with it. If you know you won’t file each piece of paper as it comes in, then add a folder labeled “To Be Filed.” Don’t use that folder to hide stuff that you don’t know what to do with.
– Don’t be afraid of commitment. Mark on your calendar the day of each week or month when you will do your filing.
IRS help
The Internal Revenue Service offers a booklet, “Recordkeeping for Individuals,” that will help with tax-related records. You can download it from www.irs.gov or order a paper copy by calling 800-829-3676.
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Tips on tossing
Record-keeping includes throwing stuff away. That’s what separates the citizens from the pack rats. Here are some things to keep in mind:
– It’s a good idea to keep tax returns and all supporting documents for at least seven years. The IRS has three years to charge additional taxes and six years if there is any reason to think you underreported your income by 25 percent or more. There is no time limit if you didn’t file a return or if it’s a case of fraud.
– Some experts suggest holding onto returns, but not the other stuff, indefinitely. Returns provide a history of your finances.
– Keep investment records for as long as you hold the investments, plus at least seven years. You need records of gains or losses.
– Likewise, real estate records, including purchases, renovations and sales, should be kept until you sell the house and deal with any tax consequences.
– Taxes aren’t the only issue. You should stow away receipts for high-dollar purchases, for example, in case you suffer a loss and need to make an insurance claim.
– Life-cycle documents–birth and marriage certificates, separation and divorce documents, military records and such–stay with you for life.
– Finally, don’t expose yourself to identity thieves. When you’re ready to discard documents that show your Social Security number or other important information, run them through a shredder.
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Edited by Lara Weber (lweber@tribune.com) and Kris Karnopp (kkarnopp@tribune.com)
