Brown Bagger
This section is set up to provide a ready-made Brown Bag Session for you to use with employees and/or managers. Use as is, or adapt this information for a general employee group. You may reproduce as many copies as needed.
Tax Time Tips: Papers You Should Keep; What the New Pension Act Means
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ho doesn’t feel like they’re drowning in paper? Receipts, bills, deeds, tax returns, paycheck stubs, the list goes on and on. We keep them because we’re too afraid to throw them away. You never know when you might need them, and there’s always the threat of identity theft that makes people think twice before tossing things. We may be keeping these papers, but many of us aren’t organizing them in a way that can be retrieved quickly when needed. If you’re like many Americans, the task is so overwhelming that you quickly give up in favor of an easier job. According to Jim Lange, attorney, CPA, and author of Retire Secure! Pay Taxes Later: The Key to Making Your Money Last as Long as You Do, knowing the time frame for keeping certain documents is the first step to getting organized. And the tax season is a great time to get organized, Lange suggests. “You will save yourself a lot of headaches with just a little bit of organization,” he says. “The best way to get organized is to start going through all of those important papers that have been piling up all year.” Lange has compiled a summary of tax and accounting documents with rough guidelines of how long you should keep them. (See also the handout section on page 4.) Keep either list posted somewhere, preferably where it won’t get buried: • Documents you never want to part with. Most people are aware that some documents should be kept for life — birth certificates, marriage licenses, insurance polices, and wills, for example. Then there are others that people know are important, like tax returns, but they aren’t sure what their shelf life should be. The bottom line — keep them all. According to Lange, documents like these don’t need to be readily accessible, but they should be kept in a safe place, like a safety deposit box at a local bank.
April 2007
• Records that should go out with the old. This category involves documents such as house deeds and car titles. The general rule is that you should keep all paperwork as long as you’re responsible for the item related to the document. While these papers are important, if you sell your house, you’ll have a new deed so don’t let an old one clog up a filing cabinet. • Records with a seven-year itch. These are documents that you can get rid of after seven years. File these by date to ensure you don’t keep them longer than necessary. Examples of these documents include canceled checks; receipts with tax implications, alimony, charitable contributions, mortgage interest, and retirement plan contributions; and credit card statements, if tax-related expenses are documented. • Records you can toss. Generally the fastestgrowing piles of documents are the records that should be purged at the end of every year. These include quarterly statements of retirement plans, bank statements, and bills with no long-term tax importance. “It’s silly to keep them indefinitely,” Lange says. “After a year, they become trash. Just remember, with the increasing threat of identity theft — shredding, rather than tossing, is the way to go.” Exercise: What records do YOU need to keep? Do YOU know which ones to shred? Do you still have questions? (See also the overview in the handout section on page 4.)
Are Your Documents Organized? Even if you know which papers to keep and which ones you can get rid of, there will still be a lot of important documents to manage. What’s the best way to keep everything organized? Make EA Report Brown Bagger 1