Attention neat freaks and those who want to take more control of their financial lives: Spring isn’t just a good time to clean your home and garden; it’s an excellent time to get your money documents in order. Now that you have waded through myriad documents for tax season, why not clean out your files?
Here is what you need to know:
BANK STATEMENTS Generally speaking, you only need to keep bank statements for one year. However, if you think that you may be applying for Medicaid, many states require that you show five years’ worth of bank statements. Also, hold onto records that are related to your taxes, business expenses, home improvements, mortgage payments and major purchases for as long as you need them.
CREDIT CARD BILLS Unless you need to reference something for tax or business purposes, or for proof of purchase for a specific item, you can shred credit card statements after 45 days. Like the bank statements, hang on to those statements that you may need for your taxes, as proof of purchase or for insurance.
TAX RETURNS/SUPPORTING DOCUMENTS Despite being able to amend your tax returns going back three years, the IRS has seven years to audit your returns if the agency suspects you made a mistake and up to six years if you likely underreported your gross income by 25 percent or more. As a result, you need to hold on to your returns and all supporting documents for seven years. If you work with a tax preparer, ask for a copy of your return on CD — it will save some space in your file cabinets.
MEDICAL RECORDS Given how hard it is to deal with health insurance companies, you should keep medical records for at least a year, though some suggest keeping records for five years from the time treatment for the symptoms ended. Retain information about prescriptions, specific medical histories, health insurance and contact information for your physician.
UTILITY AND PHONE BILLS Shred them after you have paid them, unless they contain tax-deductible expenses.
TAXES If you received a tax refund of more than $1,000, your first task is to adjust your withholding. Remember, a refund is the return of a yearlong, interest-free loan that you extended to Uncle Sam, so let’s not do that again! If you need help determining the proper withholding amount, the IRS has a nifty calculator at apps.irs.gov/app/withholdingcalculator
Once you adjust, you will have more money in each paycheck. It is critical that you capture this extra amount and save it. The easiest way to do so is to boost your retirement contributions into your employer-sponsored plan or to establish an automatic monthly draft from your checking or savings accounts into a traditional or Roth IRA.
HOME MAINTENANCE Make sure that your property/casualty insurance is up to date and make a list of maintenance items that you need to address, especially those that may have occurred as a result of winter conditions.
If you are ready to tackle some larger projects, prioritize them by choosing those that add the most value to your home. According to Remodeling Magazine’s 2016 Cost vs. Value Report, “many of the biggest percentage gains were for higher-dollar ‘upscale’ projects.” Don’t fret if you don’t have big bucks available, because the report also found that replacement jobs — such as door, window and siding projects — generated a higher return than remodeling projects.