5 Tips To Tackle Financial Records Clutter
Tax season offers an opportunity to finally dig through that shoe box or file cabinet where you’ve amassed a trove of old receipts, bank statements, pay stubs and other personal financial information.
Here are some tips on how to thin out that clutter of financial records you may have accumulated over the years:
1. THE 3-YEAR RULE
A key reason to hold on to your past tax returns and supporting documentation is so you can address any issues should the Internal Revenue Service question any entries on a previous tax return. In most cases, the IRS only has three years after the return was filed to conduct an audit. That means one generally needs to keep past tax returns for at least three years.
2. CONSIDER FUTURE TAX IMPLICATIONS
Some records, like weekly pay stubs, can be discarded after you’ve received your year-end pay statement. Even if you need to go back to a specific pay period, that stub can likely be recovered from your employer.
Still, you should hold on to records that may be a factor in future tax returns.
3. KEEP PROPERTY RECORDS
Financial records that apply to assets that could grow in value, such as a home, should be retained until you sell the asset.
In addition, keep any records of major upgrades or additions, which can help establish the value of the property.
4. KNOW RULES FOR EMPLOYERS
Own your own business or have employees? The IRS requires that you keep employment tax records at least four years after any taxes for a given year become due or are paid, whichever is later.
5. CONSIDER GOING DIGITAL
These days, banks, credit card issuers and most other businesses issue electronic statements, which you can retrieve at will online or retain as copies on your computer.
For paper records, make digital copies and store them on your computer. It’s critical that copies are legible. Should a dispute arise with the IRS over a deduction on a certain expense, the agency will be looking to determine that the receipt – whether digital is credible and not tampered with or incomplete.
“Looking back, my life seems like one long obstacle race,
with me as the chief obstacle.”
~ Jack Paar
Herschel Bentley is the Executive Director of National Credit Federation. He has 30 years experience in the credit, mortgage and real estate markets and loves helping people improve their credit and seeing referral sources grow their business.
Lawrence M Law is CEO of Vantage Credit Alliance and Regional Director for National Credit Federation. He has 25 plus years in the financial industry and working with people to correct their credit. Services offered by VCA are Credit Repair, Debt Settlement, Student Loan Consolidation, Business Credit & Funding and the Family Banking Plan.
Please see their website at www.VantageFinancialAlliance.com
If you need Mr. Law’s free credit analysis, please call 801-769-9443 or email him at Lawrence@VantageCreditAlliance.com