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Paper Flow Management 101

Mar 28, 2005 | | Comments Comments Off

Q: You had a column last year about what documents to save, and for how long. I put it aside, but now I can’t find it. Would you mail me a copy?

A: Well, no. But with the idea that it’s better to teach a reader to fish than to mail her the fish wrap, here are a few ideas for better managing your paper flow.

The guidelines for keeping and discarding paperwork aren’t all that complex. If it has to do with taxes, you’ll generally want to hang on to it for seven years. The exception is for assets that may incur tax when you sell, such as a home or an investment. In that case, you’ll want to keep the paperwork for as long as you own the asset, plus seven years.

If you make a nondeductible contribution to an individual retirement account or other retirement plan, keep the paperwork indefinitely. You can subtract a portion of those contributions from future withdrawals, which will save on taxes.

If you get a periodic summary of your transactions, you can generally discard the interim paperwork. In other words, you can toss your pay stubs once you’ve checked them against your W-2s, and your automated teller receipts once you’ve compared them against your monthly bank statement.

If you make a big purchase, keep the receipt for as long as you own the item. A receipt can help in the short run, when you need to return an item, and in the long run, by establishing its value for insurance purposes.

Old insurance policies and paperwork can be discarded once they’re replaced with new versions and there’s no longer a possibility of filing a claim.

Most people hang on to way too much paper, fearful that they’ll need it somehow, someday — when actually all it does is add to their clutter.

Professional organizer Debbie Stanley, author of “Organize Your Personal Finances in No Time” (Que, 2004), recommends an annual purge of your paper, and tax season is as good a time as any to tackle that.

Once you’re done, though, consider creating one new file — for helpful newspaper articles. Then you’ll be able to put your hands on the information right when you need it.

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Categories : Q&A, Taxes