Karl Frank, CFP, frequently volunteers for Money Line 9. On April 4, 2018, he volunteered with a group of CFP professionals to answer callers' questions about taxes.
With tax season winding down and the start of a new season, there’s no better time to tidy up the countless financial documents and stray bank accounts. We’ll even give you a “starter kit” at our Family Financial Album workshop on April 25 – sign up today and bring a friend!
Getting your financial house in order is a great exercise to complete around this time each year to get a better hold on your finances. While taking stock of what to keep and what to toss, don’t forget to enlist the help of your wealth manager to make sure you don’t inadvertently clean house of important documents.
While this can be an overwhelming task, keep these tips in mind to make it easy:
· Shred it & Forget it (After 45 Days): Unless you need to reference a transaction for tax or business purposes, or for proof of purchase for a specific item, you can shred credit card statements after 45 days. But, be sure to hold on to statements you may need for your taxes, such as charitable contributions. Same rule applies for utility and phone bills, once you’ve paid them feel free to shred, unless they contain tax-deductible expenses.
· Short Term Relationship (About 1 Year): Hold on to bank and investment statements for a year. Be sure to flag any taxable investments. However, hold on to records that are related to home improvements and major purchases until you dispose of the asset. Similarly, you should hold on to medical records for at least a year.
· Lucky Number 7: Because the IRS has seven years to audit your returns if the agency suspects you made a mistake, it’s recommended to keep your returns, and all supporting documents, for seven years. If you work with a tax preparer, ask whether they will maintain electronic copies of all returns filed.
· Declutter for the Win: If you have any orphan accounts, consider consolidating them—same for old retirement or investment accounts. Combining accounts streamlines your financial life, makes it easier to monitor your entire portfolio and ensures that your money is properly diversified.