Spring Document Cleaning

It’s spring, which means it’s time for some spring cleaning—and this spring’s focus is paperwork. I don’t know about you, but I don’t love paperwork. I’ve spent years working toward zero paper, and I’m now finally down to a handful of documents. I’ll share some tips below so you can minimize your paperwork, too!

Document delivery

If you’re tired of getting statements for your accounts or bills in the mail, try signing up for e-delivery instead. This will help save time and energy opening and sorting mail and having to dispose of it as well. Don’t forget to proactively visit the proper websites to check those statements and pay those bills.

Document retention

We all know we need to hang onto certain tax, asset, and legal documentation, but sometimes the specifics can be tough to remember. Here’s a quick list of the most common situations where you’ll need to keep documentation. Please see this checklist for a detailed list.

Income tax returns

Keep at least three years of state and federal tax returns and supporting documentation on file. Supporting documentation includes records that prove any income, deductions (including medical expenses), or credits claimed (W-2, 1099, end-of-year statements from banks and investment accounts). Depending on the state (like CA), you may need to keep tax returns for longer than three years. If you think you forgot to report income and it’s more than 25% of your gross income, keep six years of tax returns. If you are claiming a loss for worthless securities or bad debt deduction, keep records for seven years.

Investment accounts or bank accounts

Consider keeping the most current statements on file and the end-of-year statement until you complete your tax return.

Retirement accounts

Consider keeping documentation on any contributions, withdrawals, and conversions. If you made non-deductible traditional IRA contributions, keep Form 8606 until the account is fully withdrawn to track cost basis.

Debt (student loans, mortgage)

Keep the loan documents until the loan is paid off. Once the loan is paid off, keep documentation proving that the loan has been paid in full.
Property (automobiles, real estate). Consider keeping any deeds, titles, settlement statements, or bills of sale until you sell the property. Keep documentation showing purchase-related fees that were capitalized until you sell the property.

Home improvements

Keep any receipts related to home improvements as they may be used to substantiate any adjustments to the cost basis for your property.
Insurance policies. Keep the most current policies on file.

Estate plan

Keep a copy of your Will, Trust(s), Powers of Attorney (General and Healthcare), Living Will or Healthcare Directive, and beneficiary designations on file, and store the originals in a safe place.

Document storage

To reduce your paperwork, try storing these must-keep documents on your secure personal computer. Of course, with this storage method, it’s important to back up your electronic files and have firewall protection.

Document disposal

Please remember to shred any documentation that contains sensitive personal information, such as your Social Security numbers or account numbers. A personal shredder should do the trick and will be less expensive in the long run if you’re disposing of documents each year.

Password organization

How are you currently storing and keeping track of your passwords? I recommend using a cloud-based password manager like LastPass where you can store all your passwords in one place and only need to remember the “master” password to access them. LastPass has a random password generator to help you create complex passwords that are more difficult to hack. LastPass also offers two-factor authentication and doesn’t allow your “master” password to be reset to keep your account secure.

Digitize your photos

Does your paperwork include old family photos you’ve been meaning to digitize? Try sending them to a digitizing service like Legacy Box where they’ll scan and save them to a thumb drive, DVD, or the cloud. Legacy Box works with tapes and films, too. While this service may seem pricey, it might be worth paying someone to digitize those photos as they are priceless memories and should be backed up sooner rather than later in case something happens to the physical copies.

Inform your family

Make sure your family knows where you keep your documents and what your “master” password is in case something happens to you. This is especially important for estate planning documents. Having these conversations ahead of time will help alleviate the stress on your loved ones of not knowing what to do or where to find things.

Disclosure: The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Merriman cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Merriman does not provide tax, legal or accounting advice, and nothing contained in these materials should be relied upon as such.