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Financial Declutter: Your Guide to what you need and what you don’t! Thumbnail

Financial Declutter: Your Guide to what you need and what you don’t!


Article by Kaylee Wagner

Photo by Sharon McCutcheon on Unsplash

When it comes to your financial documents it doesn’t take long for statements and paychecks to pile up and unfortunately it can be difficult to know what you need and what you don’t. While having digital files helps to de-clutter your filing cabinet, over the years the space this takes out of your digital storage can also become cumbersome.

If your anything like me I’m sure you worry that the stack of documents you’re getting ready to get rid of may end up being of use at some point, which is what makes this process so difficult. But fear not! Below we’ll go over some helpful tips on what to keep, and for how long, to help along with your spring cleaning this year!

While you want to hold onto all of your past tax returns, the supporting documents can be gotten rid of after a certain amount of time. The IRS has three years from the date your return was filed to begin an audit. However, if you are self-employed, Kiplinger recommends keeping these documents for six years—that’s how long the IRS has to audit you if you under report your income by 25% or more. “Such documents may include Form W-2s reporting income from an employer; Form 1099's reporting income, interest, dividends and capital gains; Form 1098's reporting mortgage interest; year-end investment statements; receipts for charitable contributions; and records of contributions to a tax-deductible IRA.”

It’s also recommended to keep pay-stubs until you receive your W-2 so you can make sure everything matches. Same goes for your monthly brokerage statements until you can reference them to your year-end statements and 1099's.

As far as your day to-day receipts for purchases, ATM withdrawals and bank deposits, once you match the transactions to your monthly statements from banks and credit card companies they can be gotten rid of. However, if your planning on itemizing make sure to keep receipts from charitable donations, medical costs, state and local taxes, etc. It’s best to keep a running spreadsheet or document to make filing your taxes much easier and helps to make sure you know if you qualify to itemize, or if it would be better to take the standard deduction.

Keeping these tips in mind, spring cleaning should be a breeze this year - at least when it comes to your financial documents!

Sources:

https://www.kiplinger.com/slideshow/saving/T023-S003--your-financial-planning-calendar-for-2020/index.html