Most of us have too many paper records stashed away

Published 1:30 am Sunday, January 22, 2017

We are still a paper nation.

Despite technological advances, we continue to store a lot of pape — stuffed in closets, file cabinets and shopping bags.

This week for my #NoDebtNoMess Challenge, we will focus lightening your load. For me, this means addressing the paper load I’m carrying. I have paystubs from decades ago. I keep receipts and instruction manuals for items I no longer have. This paper has got to go.

But to be sure I keep what I truly need, I asked professionals for advice on what should be retained.

Let’s start with tax records. Brent Neiser, a senior director at the National Endowment for Financial Education, offered these guidelines:

Keep tax records up to seven years after the return is filed. If you fail to file in any year, or if the IRS has found you filed something fraudulent, you’d better save your records indefinitely.

Keep business, real estate and investment purchase records until seven years after you’ve sold the asset and included the sale in a tax return.

Keep your tax returns indefinitely. A return is “a window into you and your family’s economic history,” Neiser said. “It shows the big employment, investment, charitable, spending choices and decisions you made.”

Maintaining years of tax returns can help if you ever need to research payments made into social security, said Michael Eisenberg, a Los Angeles-based certified public accountant and member of the financial literacy commission for the Association of International Certified Professional Accountants.

Save receipts for big-ticket items such as a TV or computer for insurance purposes. Hold on to each receipt as long as you own the item.

Don Grant, a financial planner from Wichita, gave this advice regarding credit card statements: “It’s nice to see a monthly itemization, but most credit card companies will provide you with a year-end statement that has all expenses categorized. It you’re happy with that, shred [the monthly statements] at the end of the year.”

When it comes to home improvement documents, Kelley Long, a Chicago-based CPA, says hold on to them at least until you sell.

“If you sell your home for more than $250,000 ($500,000 for married people) more than you originally paid, you will have a taxable gain,” Long said. “You can add the cost of any improvements to the original amount you paid to reduce the amount of the gain.”

On medical bills, she says: “If you paid a medical expense with your health savings or flexible spending account, you need to keep the receipt for three years. Consider it a tax-related document.”

For investment and real estate records, says Long, “there’s some gray area.” Any investment statements that are available online do not need to be kept as paper. The most important reason to maintain these records would be to establish your cost basis when selling to make sure you claim the proper capital gain or loss on your tax return.”

There are what Long referred to as “forever documents,” which you should keep in a safe location where they are protected from damage, loss and theft. These include:

Birth certificates and adoption papers

Marriage license and divorce documents

Wills

Death certificates

Military records

End-of-year paystubs

Mortgage, student and car-loan pay-off statements.

All the experts recommended scanning documents to reduce your paper load.

“I have instructed all of my clients to search for a place in the cloud that they feel comfortable storing all of these documents in a password-protected vault,” said Brad Ledwith, a CFP from Silicon Valley. “If they secure storage of files in the cloud, then the questions of how long to keep things are moot.”

Now that I know, I’m ready to let go.

— Washington Post Writers Group