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Tax Season: Let’s Talk About Records Retention

Updated: Feb 7, 2023

What are the files you need to keep for your taxes?


It was Ben Franklin that said there are only two things in life that are certain: death and taxes.


He wasn’t wrong.

Disorganized paperwork office files | RETHINK organization | Pittsburgh PA


One of my favorite song lyrics of all time is by Rush (the band, not the personality) in their song Freewill. “If you choose not to decide you still have made a choice.”


Inaction is as much a choice as action, but only one of them provides the option for you to impact the outcome.


Sometimes doing nothing is the right choice, like perhaps when presented with a moral dilemma. But when it comes to taxes (or, in fact, anything related to finances) choosing to do nothing can be devastating and lead to some terrible results.


When are taxes due?


For my overseas readers, the annual filing deadline set by the United States Internal Revenue Service (IRS) is normally April 15.


Detailed discussion of actual tax filing is beyond the scope of this article so suffice it to say it comes once a year, if you have any income at all you need to file, and the consequences are severe if you are found to be dishonest or negligent.


The infamous gangster Al Capone was guilty of a lot of terrible crimes but what eventually brought him down was tax evasion.


If that’s the bar, you can meet it. Don’t be Al Capone. Don’t mess with the IRS.


Tax season can be stressful but there are some things you can do to reduce that stress.


Read on to see how a little bit of work through the year can save you hours and hours in the days leading up to April 15.


What is records retention?


A records retention schedule is a policy that defines how long a type of record should be kept and provides disposal guidelines for how and when those records should be discarded.


In terms of riveting interest, records retention can be right up there with watching paint dry.


But for me, one of the best Christmas gifts my husband ever bought me was a label maker. Our first New Years Eve I spent with a bottle of wine, a bunch of hanging files, a pile of new manila folders, and our brand new label maker.


Home files labeled in hanging folders | RETHINK organization | Pittsburgh PA

Not everyone is a nerdy professional organizer-type but I take comfort in knowing where our records are. Being able to put hands on the important items to reduce the stress of uncontrolled paperwork was worth missing out on a party that year.


Businesses should always have a retention schedule but we may not commonly develop them for our homes.


The sooner you have a system in place and get on a regular schedule, the sooner your tax season can be less stressful.


A Disclaimer


This article should not be taken as legal or financial advice. Always consult with your personal accountant, financial advisor, attorney, and/or partner or spouse before destroying any documents.


As your organizer, I will never destroy your documents. That is solely your responsibility. But there are some recommendations you can follow to manage your household papers. I would rather you have too many files than destroy too many, but that does not mean you need to live in chaos.


The IRS provides some good guidelines and so do many personal finance gurus like Suze Orman and Dave Ramsey.


My personal suggestion is to do your research, consult with your attorney and accountant, decide on a schedule for your household, and get busy sorting, labeling, and filing.


A key takeaway is that you don’t have to keep everything forever. Fear of destroying documents can lead to piles of paper no one will ever want or need. But wholesale destruction of paperwork can be detrimental. So be cautious and consult professionals.


Suggested household document storage guidelines


The following are some common household document storage guidelines. This list is not exhaustive but rather catches some major categories. Research and decide your own.


Top Tip: If you are storing information for multiple people in a household keep each type of record in the same order by person so you can quickly see when one is missing, e.g. Husband; Wife; Child #1; Child #2 for medical records, insurance paperwork, etc.


Common household document storage guidelines | RETHINK organization | Pittsburgh PA


Suggested permanent locked storage documents


The following is a list of some items that are best locked up safely either in your home (in a fire safe box) or at a local bank (in a safe deposit box). Again, this list is not exhaustive but catches some major categories.


Research and decide your own.


Household documents for permanent locked storage | RETHINK organization | Pittsburgh PA

How to prepare for tax season


To prepare for tax season, get a glass of water or a favorite beverage, gather your papers together on a table, grab a chair, and settle in.


Sort all your papers into similar groupings and reduce the overall amount through judicious decision-making. Again, do not necessarily shred right away but set aside things that may not be needed and consult with your financial professionals.


Place categories of papers into files. I like to use manila envelopes and hanging file folders, and preferably use some sort of color-coding by subject. Label them neatly so you can locate them easily.


Then, store your needed documents in a place where you can easily access them for use.


The initial sort of all your papers can be painful. But setting up systems can increase your confidence and decrease the time it takes to file your taxes each spring. If it feels overwhelming, ask for some help. Sometimes having a trusted partner in this process can help.

 

Are your papers serving you?


I still have my first ever pay stub from my first job at McDonald’s in 1991. There are beautiful stories of family members finding Food Ration cards from WWII in loved one’s belongings after they are gone.


Sometimes holding on to sentimental papers can provide a tangible tie to the past.


But paperwork, like everything else in your home, should serve you, not the other way around.


Gain control of your papers to make room for what matters most.


If you need some help sorting paperwork, contact me.


 

When you're ready to tackle your tough organization project, I am here to help you learn how.


Let's RETHINK organization together.


For more information, visit the RETHINK website today.


Mandy Thomas Professional organizer | RETHINK organization | Pittsburgh PA


Mandy Thomas is a professional organizer fulfilling her lifelong passion for creating order out of chaos. She finds joy in helping people tackle their most overwhelming spaces and collections to create the optimal living space and enjoy their homes.






Professional organizing | RETHINK organization | Pittsburgh PA



RETHINK organization is on a mission to help you develop long-term patterns of organization that you can maintain and feel good about long after our work together is done.


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