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Blog: Minimizing Financial Clutter
Retain This Half for Your Records

You know how it goes… The bill comes in the mail.  You open it.  You write a check.  You tear off the payment stub and enclose it in the return envelope with your check.  The other half of the bill?  Well, it does say "retain this half for your records", doesn't it?  So, you dutifully put it in a file folder in your file cabinet.  (Or maybe you drop it on top of the pile on the floor.  But that's another subject…)
When my mom died, and I was cleaning out her house, I found 50 years' worth of bottom-halves of telephone bills in her file cabinet.  And, I admit that I used to accumulate paid-bill-halves in the same manner.  After all, when the bill commands me to retain it, and my mother teaches me to retain it, surely dire things would happen to me if I were to drop it in the shredder.
Then one day, I became a professional organizer.  And I worked with scores of lovely, dutiful clients who also retained all of the bottom-halves for their own records.  They retained them, but they didn't have room for them.  They retained them, but they didn't want to.  They retained them, but they admitted that they never, ever needed to look at them.
I began to Question Authority.  Maybe the admonition to "retain this half for your records" really didn't mean that we have to keep it forever.  Or maybe, gasp, we didn't need to keep it AT ALL!  If I was going to tempt fate and plug in the shredder, though, I decided I had better do some research first.
What Would the IRS Do?
When most people think about retaining paperwork, they think about retaining papers for tax purposes.  IRS Publication #552 addresses that very subject.  You can get a pdf version of it by going to http://www.irs.gov/publications/p552/index.html. 
In a nutshell, the IRS requires you to keep any documents that:
  • Identify sources of your income
  • Keep track of and help prove tax-deductible expenses
  • Keep track of the cost of and improvements to your property
  • Keep track of the cost basis of your investments (purchase & sale confirmations)
  • Help you prepare your tax returns
How long do you need to keep those documents?  The IRS says that you need to keep them during the "period of limitations" for that particular year's tax return to be audited – generally from 3 to 7 years after the date you filed the return.
The easiest way to see if a document should be retained for tax purposes is to look at last year's tax return.  Do your telephone bills support an expense that you claimed as a deduction?  If you're running a home-based business, and you claimed a deduction for your telephone expenses, then they do.  If not, then they probably don't.  When in doubt, check with your tax preparer.
Other People Who Care About Your Paperwork
Your Insurance Company.  The statute of limitations for property & casualty claims varies from state-to-state.  Unless you are an insurance or legal wonk and know about these things, you should keep your automobile, homeowners, and personal liability umbrella insurance policies permanently to be able to verify your coverage, in case someone files a claim many years later.  Also, if you need to file a property claim, you might need to show receipts to show the value of the item, so keep receipts for those large purchases for as long as you own the item.
Your Creditors.  If you have taken out a loan, you need to keep the related paperwork.  If you've paid-off a loan, you need to keep the "letter of satisfaction" or other documentation that verifies the payoff.
Your Contractors.  Keep any contracts you've signed.
Your Family.  If you haven't already done so, round up all of your official-looking vital documents, make a list of what you have and where you keep it, and give the list to someone in your family.  Do it right now.
Other Reasons to Keep (Some) Papers
  • As a record that the vendor received your last payment (will your cancelled check or your credit card statement do, instead?)
  • In case you want to return the item you purchased.  (Keep the receipt just for the authorized return period.)
  • In case the item you purchased is under warranty.
  • For "case history" purposes – such as your medical lab tests, school report cards, etc. 
  • As a record of your account number and contact information for the vendor (Try calling the phone company and asking them for your account number.  They won't give it to you.)  So unless you need to keep the bottom-half of the bill for one of those other reasons, you really only need to keep the most recent one, right?

posted on: 8/24/2008 11:30:00 AM by Katherine Trezise
category: Finances

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Minimizing Financial Clutter

by Katherine Trezise

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About Katherine:

Katherine Trezise is president of Absolutely Organized, based in Baltimore, MD. She is president-elect of the National Study Group on Chronic Disorganization. Katherine holds a masters degree in business administration, is a Certified Professional Organizer® and a Certified Professional Organizer in Chronic Disorganization®. Absolutely Organized specializes in helping people organize their homes, paperwork and financial records to make room in their lives for the things, people and activities that are most important to them.

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