The Yearly File Purge

by Ramona Creel

Tax Records

Start by pulling out any documents that relate to income, withholding, tax payments, charitable contributions, business expenses, and deductions for the past year.  If you normally give these to your accountant to tally, please do not just dump everything into a box or bag — at least take the time to put each category in a separate file, making things just a bit easier on your poor CPA. Wink And if you do your bookkeeping on the computer and have NOT inputted this information yet, now's the time to get caught up! In the future, you'll make tax-time a lot less stressful if you do your updating each month instead of waiting until the end of the year.

Once you've emptied these items from your drawer, make sure you have labeled folders set up for storing each category of the coming year's paperwork in the “tax” section of your active files. Generally speaking, you should hang onto supporting tax documents for 6 years in case of an audit — but ask your accountant if you face any special circumstances that would extend that to 10 years. Store your archived paperwork in hanging file pockets labeled with the year, contents, and destruction date. Then when you add the new year's tax records, the oldest can be shredded.

Permanent Files

You are required to keep tax returns forever — there is no statute of limitations on how far back the IRS can ask you to prove that you filed a return. So make sure you have these stored together, separate from the supporting documents, organized in chronological order. A few other items should also be moved from your monthly storage to a permanent file:

  • receipts for expensive items like art and jewelry
  • warranties and manuals for major purchases
  • investment statements and trade confirmations
  • important correspondence and legal documents
  • car and property records
  • insurance policies
  • medical, treatment, and lab records

Put these in a file where you can easily put your hands on them when you need them — preferably something that is fire-proof. And of course, hard-to-replace vital records (titles, deeds, birth certificates, passports, etc.) should also be placed in a fire safe or safe deposit box.

Know What To Toss

Our goal here is not just to move documents from one file to another — we also want to do some actual cleaning out! Take a look at the files where you store all of your monthly bills — utility payments, credit card and bank statements, medical expenses, household services, receipts, etc. Your active files are only intended for current paperwork. They should be emptied and their contents redistributed (either to archive storage, your permanent files, or the shredder) each New Year.  If it's not serving one of the purposes mentioned above, why are you keeping it? The rest of your “everyday” paperwork has a limited shelf life. Aside from tax records and major purchases, there are only a few good reasons to keep a bill or receipt after 1 year's time — because:

  • you are trying to clear up an error or dispute with your account
  • you need to return an item that you have purchased
  • you are waiting on your insurance company to pay a claim

If a receipt doesn't meet one of these criteria, what purpose is it serving? With most bank and credit card companies, you have a limited time in which to resolve a dispute — usually 60 days. So letting a receipt linger in your files will actually make it harder to clear up a problem later. If you're keeping old statements because you “might need them someday,” remember that most of these records are now available electronically any time you want them. And if you still can't convince yourself to toss them out, you can keep bank and credit card records archived for 3 years – but after that, they have to hit the road!

© Ramona Creel, all rights reserved. Ramona Creel is a modern Renaissance woman and guru of simplicity -- traveling the country as a full-time RVer, sharing her story of radically downsizing, and inspiring others to regain control of their own lives. As a Professional Organizer and Accountability Coach, Ramona will help you create the time and space to focus on your true priorities -- clearing away the clutter other obstacles and standing in the way of that life you've always wanted to be living. As a Professional Photographer, Ramona captures powerful images of places and people as she travels. And as a travel writer, social commentator, and blogger, she shares her experiences and insights about the world as we know it. You can see all these sides of Ramona -- read her articles, browse through her photographs, and even hire her to help get your life in order -- at www.RamonaCreel.com. And be sure to follow her on Twitter and on Facebook.