Posted by Mary Caraccioli | Filed under tax
I received a good follow up question in response to my last article on what women over 40 years old need to know about money. Becky asked, “What bills should I save forever and which should I keep?” Great question Becky! My office area at home is not very big, so it doesn’t take long for me to get overwhelmed by mountains of files. I think you will find Eva Rosenberg’s advice from MarketWatch.com very helpful. I am a longtime fan of MarketWatch.com. I mostly refer to it for market news, but they also have personal finance reporting like Eva’s column. –Mary
What to keep
Save all tax returns forever, along with any documents that were used to substantiate any income or expenses. Anything else? Get rid of old utility bills, credit card bills, etc. that are over five years old. Be sure to save all records relating to the purchase of securities you still own, personal or business assets or real estate you still own — or owned during the last five years. Keep all records relating to the original purchase and rollovers of tax-free exchanges.
Definitely hang on to all insurance policies presently in effect. In fact, since they may only be sending invoices upon renewal, not new policy documents, keep the original policy paperwork.
When it comes to IRA and retirement accounts, keep records of all the contributions. Sometimes, states’ contribution limits are different from that of the IRS. You may have a state basis in a retirement account. Or if you scour those old tax returns and compare them to your contributions, you might find that in some years you were not able to deduct your IRA contribution at all. You may find you even have an IRS basis in your IRA.
Anything you’re leery of destroying, don’t. Or scan it onto electronic media, preferably as PDF files, since those seem to have been used consistently for years. Be sure the scanned records are very legible before destroying your records.
Don’t toss, shred
Do not simply throw out your records. Your trash is fair game for anyone who wants to dig into it. If they find your tax documents, bank accounts, credit card statements or other key documents, you may be opening yourself up to identity theft. You already know this, right?
Shred the documents. Use a cross-cut shredder at the very least; better yet, make confetti. If you have a mountain of files or boxes to shred, call a mobile shredding service. They will bring a great big truck, with noisy, chomping, monster teeth, that will grind up 50 boxes in less than 15 minutes. The better services have a camera that lets you see into the truck while your history disappears before your eyes.
Can’t afford the big truck? No worries. After all, once you get past their base fee, each additional box is cheap. Invite your friends, your colleagues, or all the neighbors on your block to participate in a community shredding day. It could be fun. And it will cut the cost per person dramatically.
Not good at organizing and hate the neighbors? Do a local search for free shredding. Sometimes, schools, the Chamber of Commerce, or some other community organization offers a “green day” that includes shredding, and gathering of defunct computers, monitors, etc. Of course, you’re welcome to make a donation.
Well now, you’ve retrieved your missed deductions, emptied out your closets, attics and garages. What next?
Take a breather for a little while. Get out and enjoy the sunshine and stop sitting hunched over your computer. It’s spring — enjoy the renewal. Then get ready. Next month, we’ll put you to work getting ready for your 2010 tax issues.
Eva Rosenberg is the founder of TaxMama.com and an enrolled agent licensed to represent taxpayers before the IRS. Visit her new website at www.TaxMama.com