Great Time to Clean Up Your Home Office

Knowing that the thought of taxes may already be a distant memory for many of you--and for some still the nagging realization that October 15th is looming ever so near--we thought this might be a good time share some office clean up info. The article below appeared in the San Diego Union and I thought it was a really good summary.

By Claudia Buck

MCT NEWS SERVICE
August 31, 2008

Feeling buried beneath piles of paper? Are your grocery receipts and 401(k) statements stuffed in a desk drawer or spilling out of your in-basket? Take heart. You've got lots of fellow paper pack rats, particularly with the tax season behind us.

What to keep and what to toss?

“We get these questions all year, but especially after tax time,” said Diana Muller, an enrolled agent and partner with Sacramento-based Just Taxes. “This stuff piles up.” To clean up your home office or kitchen table, here's a guide to financial record-keeping and discarding.

To get started, gather a pile of file folders, marked by subject (“Retirement account,” “Taxes,” “Vehicles,” etc.). Invest in a file cabinet or secure box. For documents you want to keep, consider getting a small safe or safety deposit box. As backup, keep copies of important documents in your computer.

Taxes: Generally, keep your final tax return forever. But all the tax-related documents that go with it need to be kept for only three to four years (how long you're subject to a possible audit). If you think you may have understated your income, keep documents up to seven years.

Canceled checks: Whether you bank online or in person, you can discard after one year. However, keep copies that might be needed for taxes, warranties or other insurance reasons.

Investments, 401(k)s: Keep all documentation of a purchase or sale of any stock, bond or mutual fund. Either make a separate file or lump them all together. Once it's sold, keep records for seven years. For IRA and other retirement accounts, keep monthly statements until your end-of-year summary arrives.

Vehicles: Keep all maintenance records and paperwork related to your car, until it's sold. Then give the file to the new owner.

ATM, credit card receipts: Keep until you can check them against your monthly statement; toss if they reconcile. Keep receipts for insurance claims or tax deductions. And if it's for a consumer product, attach it to the warranty for future proof of purchase.

Home-related documents and receipts: Keep records of all home improvements until you sell the house because they can be deducted against capital gains at tax time. Phone and utility bills can be tossed after a year, unless you're deducting a portion for business expenses.

Documents to keep forever: Birth and marriage certificates, current passports, home inventory (for insurance records), Social Security cards, “pink slips” for vehicles, stock-purchase agreements, tax returns, current insurance policies and divorce papers.

Don't toss it, shred it: When in doubt, shred any paperwork that contains personal financial data, especially Social Security numbers, PINs or passwords, bank documents, signed contracts or leases, even travel itineraries or used airline tickets.

If you would like to research this topic further there is some good information available from the IRS in Publication 583 entitled Starting a Business and Keeping Records. It provides a sample of a record keeping system for your business along with sample reports.

Once you get a system in place all your record keeping will be much easier as you will know what to do with each piece of paper when it hits your desk.