If you struggle to keep your paper documents organized, don't worry, you're not alone. It's not surprising since you have to decide if you need to keep it, then figure out where to put it, how long to keep it, and finally, how to discard it so that your information is safe. The six Paper Progress questions can help you and today, I'll focus on three categories of documents I routinely come across as a Professional Organizer. I'll share the resources I provide my clients to determine how long a document should be kept.
How long should I keep tax returns?
One of the first questions I get is "how long should I keep my tax returns?"
Since I am not a tax accountant or an attorney, I direct everyone to the IRS page on the period of limitations that apply to income tax returns.
But here's the general idea. If you've intentionally submitted a fraudulent tax return (#6), then you need to keep all your records indefinitely. The same time frame applies if you didn't submit a tax return (#5). If that doesn't apply than you still have other criteria to base your decisions on. If you under report income by more than 25% (#4) then the period of limitations is 6 years. If #6, #5, and #4 don't apply then the period of limitation is 3 years. But talk with your lawyer or tax accountant and read the IRS page on the period of limitations yourself.
The common retention period of seven years, according to the IRS, is only necessary if you claim a loss from a worthless security or bad debt deduction (#3).
One of the main reasons most people hold on to their tax returns longer than they need to is lack of file maintenance, which is why I wrote Build in Your File Maintenance. You'll still be holding on to your hard copy tax returns and documentation longer than you may need, but the maintenance will be built in once a year when you add your current taxes and remove and shred the taxes from ten years ago. One in and one out. You can also clear out your electronic files at the same time.
How long should I keep Explanation of Benefits (EOBs)?
Your insurance company (including Medicare & Medicaid) will send an Explanation of Benefits (EOBs) of your medical services. These tell you who is billing, how much they were paid by your insurance company, and how much you may owe your health care provider. It's not a bill, just an explanation of your benefits and responsibilities.
Your health care provider may have up to 18 months to submit a claim, which may be extended if the insurance company needs documentation or additional information to pay your claim. You might be billed long after you went to the doctors.
Keeping your EOBs even after you've paid the bill is a good idea. The Cooperative Extension System (Extension) suggests keeping your EOBs for 3 to 5 years. You may not have to keep the paper copy (if you even get paper EOBs) as your insurance company probably has it available electronically, but check how long they keep them.
How long should I keep Estate Financial Records?
It's hard enough sorting through your own financial papers, but to have the responsibility of settling the estate of a loved one can be even more of a challenge.
The Cooperative Extension Service recommends that you keep the estate's financial records for 7 to 10 years after the estate has been settled or distributed.
Wondering how long to keep other papers?
I have a Keep or Toss worksheet for sale that provides retention references and walks you through establishing your own paper retention guidelines.
It covers:
Tax Returns & Documentation
Monthly Bills & Statements
Financial & Property
Vital Documents
Important Documents
Employment & Education
and Additional Items
Purchase the Keep or Toss worksheet here
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If you want help in getting your files under control, consider joining my monthly Paperwork Party™. It's virtual. You can be anywhere your paperwork is and still get your questions answered. By seeing others working on their paperwork, you'll feel motivated and energized to focus on your paperwork. I'm there to answer any questions you have as you sort, file, or organize your papers. You're not alone!
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