Important Documents to Keep

It’s tax season. That means you’re gathering W-2s, 1099s, documentation of charitable gifts, and other forms to give to your accountant (or enter into Turbo Tax yourself). Of course you retain a copy in case the IRS has questions on your return, right? Well, you should for at least three years. If you want to be really safe, keep it for six years.

The IRS can go back and audit any of your returns in the last three years. If that happens, it’s up to you to provide documentation to support your tax return. If you can’t support a charitable deduction, it didn’t happen. The IRS can also go back up to six years if they believe you really understated your income. So keep three years of tax files for sure and six if you run a small business. Beyond that, most people can go ahead and start shredding.

While we’re on documents though, you should also make sure you have a copy of your wills, health care directives, and life insurance policies in a place where your family can easily find them. It’s also a good idea to have a list of your investment accounts, especially if you have a handful of old 401k accounts here there and everywhere. Keep documents on any student loans and mortgages you have outstanding. Keep the payoff letters for a few years when you get to that point too.

It is a good idea to go through your documents once a year to clean out the ones you don’t need. I find that makes it easier to find the ones you do need.

p.s. You can keep a lot of these documents electronically. Just make sure you store them somewhere safe, encrypted, and password protected.

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