Mastering the practice of retaining records.
Your System for Proper Record Storage
When contemplating storing files, some common questions we receive are:
- How long do I have to keep this stuff?
- What do I keep?
- How far back can “they” go?
Storing records, having a proper system for storing tax and financial records can feel like a daunting task. We are here to bring light to the situation. Knowing why you need to save files and more importantly having a system in place will bring peace and clarity to your day to day life.
Proper record storing is critical because when applying for a loan or mortgage, financial institutions will require you to provide past tax returns. Even disability insurance providers and some life insurance providers will request one to three years of these financial records. In the unfortunate event of an IRS audit, you are required to save financial records and business records for 7 years.
Lets go over what you actually need to save:
Income Tax Returns – 5 years
Supporting documents – 5 years
- A few examples of supporting documents include, but not limited to:
- Anything connected to your tax return: W2s, 1099s, 940, 941s
- Unemployment Insurance forms
- Workers compensation forms
- Dividend statements, interest statements, receipts, bank statements,
- Mileage logs
- Any other income and expense forms you may acquire
How should I store my records?
Good file saving practices are not complicated or time consuming when you have a good system in place.
Step 1: Have a process for what to do with records.
If it is a paper bill then have a box to temporarily hold before storing. If it is digital, store the document in the proper folder immediately when received. Take 10 minutes to map out your system.
This process should include:
- Where to put a document when it arrives?
- When to act upon the document?
- If needed, where is a temporary storage place?
- Where is the permanent storage of the documents?
Step 2: Store your records.
A good way to save records is to keep them in a folder in a box or file cabinet. Label a hanging folder with the specific category and then diligently file records into these folders as they arrive.
For the more computer friendly person, you can simply scan the documents and keep an electronic version of them. After scanning, label the file in an easy to understand method that you use every time.
An example for file name structure is:
When you receive tax services from ClearPath Advisors, keep the blue folder we provide to you with all of your documents that are included.
Now, go to your filing cabinet or folders on your computer and see where you fit in.
You do not need to bog down your system or fill your office with documents that are no longer needed. A clear desk brings peace of mind and allows you to do your best work!
We are here to help!
If you would like help in the preparation and planning to get you and your financial records organized, call our team of dedicated advisors at 218.847.5225 or contact us at either office location in Detroit Lakes, MN or Fargo, ND and we will be happy to help you.