how to organize financial records

How long should you keep financial records? How should you organize them? Why keep records at all?  

Well, there's the little consideration of being prepared for tax time, for starters.

If the internal Revenue Service has a question about an item on your tax return, you must be prepared to answer it.

These tips for organizing financial records will help make quick work of tax time - and beyond.

create a financial records cheat sheet.

A financial records cheat sheet is your guide to all your financial papers, advisers, documents, the location of safe deposit box key. It should include copies of what's in the safe deposit box, and what to do - and who to contact first - in case of emergency. If anything happens to you, this document can help surviving family members through the first few days.

store financial records in a safe deposit box or fireproof strongbox.

Anything extremely important financially, or that would be very difficult to replace, should be placed in a safe deposit box or fireproof strongbox.

Documents meeting this criteria usually includes titles; birth, death, and marriage certificates; copies of wills and deeds; inventory tapes of household goods for insurance purposes; and passports.

create bank and credit card statement folders.

Compile a full list of the names and numbers of each credit card in the family. (This includes bank card numbers.) Include the toll-free numbers for reporting loss or theft of said cards.

create an estate planning folder.

Even if you're just planning to plan your estate, create and label an estate planning folder so you've got a place to file the information in the future.

create investment folders.

In these folders, store information on stocks, bonds, and mutual funds. Your records should show the purchase price, sales price, and commissions. They may also show an reinvested dividends, stock splits and dividends, load charges, and original issue discount.

create a life insurance policies folder.

Store life insurance papers here, or you can put these important papers in your safe deposit box or strongbox.

You'll also need a loan and mortgage folder.

File these papers by bank or lending institution or simply under "Home Mortgage".

place major expenditure receipts in a single folder.

You'll want to put the purchase information for your new Sub Zero fridge and other expensive belongings here.

Create a pay stub folder or envelope.

Each pay period, stash your stub.

what financial records and receipts to keep for taxes.

When it comes to financial records and receipts, deciding what receipts to keep for taxes is easy - keep all those that show income or deductible expenses for three years. 

This is because the Internal Revenue Service (IRS) has a three-year statute of limitations on auditing a return.

If you failed to report more than 25 percent of your gross income, the government will have six years to collect the tax or start legal proceedings.

Filing a fraudulent return or failing to file a return eliminates any statute of limitations for an audit by the IRS. If you hire a tax specialist, check to see how many years you should keep your records.

And, of course, keep records relating to property until the period of limitations expires for the year in which you sell or otherwise dispose of property.

› How to Organize Financial Records


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