What Documents Do I Need to Keep On File?

Anyone can feel a bit “overwhelmed” when they start thinking about the various documents and paperwork that they have collected over the years. Whether these papers pertain to your taxes, healthcare, or your legal matters, it is important that you have some clarity around which documents you should keep indefinitely and those that you can finally part with. If you are looking to simplify the number of papers you have on file, here are a few tips that can help you navigate an endless sea of paperwork:

Tax Returns and Supporting Documents

A good rule of thumb is to keep tax returns and supporting documents for three years, especially if you file a basic return or have not had any issues with the IRS. Business owners should keep their papers on file for four years. If you feel that you have underreported your income by more than 25% or if you need to claim a loss due to bad debts, be prepared to have these on hand for seven years. Always keep your W-2’s and any documents related to a taxable gift or an inheritance.

Healthcare Documents

If you are writing off medical expenses, make sure that you keep all medical receipts and anything that you are using towards an HSA account if you are enrolled in a high-deductible health savings plan. If you are currently on Medicare, your Medicare Summary Notices should be kept for one year or until your bill has been paid.

Legal Documents

You should always have an original copy of your birth certificate, marriage certificate, medical directive, passport, and Social Security card on file. If you’ve had a family member pass away, you need to keep a copy of the death certificate. These are the documents that you want to have at your fingertips and avoid the trouble of finding them online and waiting for a copy to be mailed to you.

Documents That Are Most Commonly Overlooked

If you’re a business owner and taking a mileage deduction, you want to make sure that you are keeping a mileage log and that it is current. Having to recreate a mileage log can be a tedious process and not a productive use of your time. Also, if you have certain expenses, you need to keep the receipts as proof of those expenses in case you are audited by the IRS.

Consider a Digital Copy

It’s essential to keep your documents in a safe and secure location whether that’s in a safety deposit box or a fireproof safe in your home. Another good rule of thumb is to have a backup for your important documents and papers by keeping a digital copy of these items in an encrypted cloud. Your medical directive, powers of attorney, and will are just a few examples of documents you want access to in case of an emergency. By keeping these items electronically, you can access them from anywhere when needed.

If you find that you have a unique situation or circumstance when it comes to your tax returns, healthcare documents, or legal paperwork, consider talking with one of our financial planners before getting rid of any important papers. As trusted professionals, we can help you determine which documents need to be kept on file and how you can store these items electronically in a safe and secure manner.

Advisory services offered through J.W. Cole Advisors, Inc. (“JWCA”). Financial Dynamics & Associates, Inc. and JWCA are unaffiliated entities.