May  2012     Accounting Tips from Smith, Sullivan & Company P.C. 
  
This Month: 
  • What financial paperwork can you dump and what should you hold onto?   
  • Tips for keeping financial paperwork organized
    •  
    What receipts and tax documents
    can you dump and which should
    you hang onto? 
     
    Time for financial clutter spring cleaning!
    What can stay, what can go and when.
    It may seem crazy, but the IRS typically has seven years to audit your tax return. If you write off a bad debt or claim a tax break for worthless securities, you need to keep proof for seven years after filing - or until April 2019, for your 2011 return.

    House/condominium records - from seven years to permanently ...
    Keep all records documenting the purchase price and the cost of all permanent
    improvements - such as remodeling, additions and installations.
     

    Keep the following documents for 3-years:  

    Medical Bills     and Cancelled Insurance Policies
    Records of Selling a House - (Documentation for Capital Gains Tax)
    Records of Selling a Stock - (Documentation for Capital Gains Tax)
    Receipts, Cancelled Checks and other Documents that support income or a deduction on your tax return - (Keep 3 years from the date the return was filed or 2 years from the date the tax was paid -- whichever is later)    
    Annual Investment Statement - (Hold onto 3 years after you sell your investment.)

    Keep these documents and receipts for 1-year: 
     
    Utility Bills - (Throw out after one year, unless you're using these as a deduction like a home office - keep them for 3 years after you've filed that tax return)
    Credit Card Receipts - (Unless needed for tax purposes and then keep for 3 years)
    Cancelled Checks - (Unless needed for tax purposes and then keep for 3 years)
    Bank Statements - (Unless needed for tax purposes and then keep for 3 years)
    Paycheck Stubs - (Dispose of once you have compared to your W2 statement)
    Quarterly Investment Statements - (Hold on to until you get your annual statement) 

     
    Keep these statements permanently:

    Retirement/savings plan statements - (Keep the annual summaries until you retire or close the account. Keep the quarterly statements from your 401(k) or other plans until you receive the annual summary; if everything matches up, then shred the quarterlies.

    IRA contribution records - If you made a nondeductible contribution to an IRA, keep the records indefinitely to prove that you already paid tax on this money when the time comes to withdraw.

    Brokerage statements - (Until you sell the securities)
    You need the purchase or sales slips from your brokerage or mutual fund to prove whether you have capital gains or losses at tax time.      
       
    Sources:
    How to Purge Your Financial Clutter, Liz Weston, MSN, Money
    Financial Clutter, What to Keep and What to Get Rid Of, Suze Orman 

     

     
    Tips for organizing your financial paperwork.   

    Do your bills and receipts get tucked into the first convenient spot you see and then take up permanent residence all over the house? Bank statements, credit card statements, and bills get tossed on the dining room table or in a spare drawer where they remain unsorted and neglected. Now that tax season is over for most of us, it's a good time to do some spring cleaning and sort out our financial paperwork.


    Here are some tips to help you keep your financial statements organized! 

    1. Decide whether statement or receipt is important enough to keep - if not, toss it. 
    Take time to read through documents to figure out if you need them. Then ask yourself, "What's the worst thing that can happen if I throw it out? Can I get another copy? Is it something that I'll need later on?" 
     
    2. Keep ONLY the most up-to-date copy of information.
    For example, when you get a new homeowner's insurance policy, toss out the old one, or when you get a new stereo, discard the manual for the one you've just disposed of. 
     
    3. Keep documents and receipts in a central location. 
    Choose a central location so you're not scavenger hunting every time you need to find something. Store documents near your computer, especially if you pay bills electronically or balance your checkbook using a financial program. 
     
    4. Consider going electronic 
    Have you thought about trading a paper storage system for one you can access on your computer? Generally it's easier to search for a document on a hard disk drive than by combing through file folders by hand, and it takes up less space. Make sure you back up records on CD or zip drive. 
     
    5. Long-term or short-term storage?  (see the list above) 
    For long-term storage of important legal and business papers, such as tax documents, insurance policies, stock certificates and the like, consider a safe-deposit box or buy a fire-proof box where these important records can be safely stored.  

    Source: How to Organize Your Financial Paperwork, Jenny McCune at bankrate.com
     
     
     
    Linda Smith and
    Maureen Sullivan   
    Questions? 

    Call us at 508.871.7178

    or email: contact@smithsullivancpa.com 

    or go to:  www.smithsullivancpa.com   

     

     

     

     

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