With last week's tax filing deadline past -- and that box of canceled checks, pay stubs and other records probably still cluttering the house -- it's time to consider the fate of your paper trail.
How long do you need to keep this stuff?
"What most people do is they pile it up in their attic or garage, and finally it gets to be 15 years old and they say, 'Now I can throw it out!' But meanwhile, they've used some prime real estate for something they don't need to keep," says organizational consultant Barbara Hemphill.
In her 27 years of bringing order to homes and workplaces, and writing a book ("Taming the Paper Tiger at Home"), Hemphill has addressed how long to keep practically every piece of paper imaginable -- from W-2 forms to the kids' artwork.
"I teach people the art of waste-basketry," she says, "and some of the questions you ask are, 'What's the worst possible thing that would happen if I didn't have this?' and 'Does this exist elsewhere?' . . . Some things are pretty clear-cut."
Such as how long to keep tax-related paper, and what kind of shelf life the tax man recommends. "The authoritative IRS answer is usually to hold those returns for at least three years," says IRS spokesman Anthony Burke.
Simple? Not quite. The IRS's advice actually ranges from keeping tax files for three years all the way to forever, because of different statutes of limitations -- the number of years you are culpable, says Burke. IRS Publication 552, which is everything you wanted to know about record-keeping but were afraid to ask, states: Keep for six years any returns that under-report income that amounted to 25 percent or more of your reported gross income; keep for seven years any returns that claim a loss from a worthless investment; and keep for all your days any returns that are fraudulent or that you never filed -- because you're never off the hook.
Hemphill says seven years is the standard advice because not all taxpayers know when they have under-reported income. But she has stashed away all of her old returns. "The report itself isn't very thick, and I don't keep all the supporting documents," she says.
While supporting documents are your evidence should you be audited, non-tax paperwork is another matter. "You can keep your pay stubs, for instance, until you get your W-2, and then you can throw them out," says Hemphill, adding that, if needed, non-salary information from the stubs (medical insurance deducted, union dues paid, etc.) is available from the human resources department.
Here's what Hemphill and other experts have to say about handling routine household paperwork:
• Monthly bank statements: Hemphill tosses them unless they have tax significance. "What's the purpose? To balance your checkbook," she says. "How many of you balance your checkbooks?"
• Quarterly investment statements: "You only need to keep them until your annual statement comes," Hemphill says.
• Mortgage statements: To be safe, keep them until you no longer own the property, Hemphill says, but if you're really squeezed for space, toss them as soon as you get your annual form for taxes.
• Deposit slips and credit card, ATM and debit card receipts: Keep "until the transaction appears on your statement" and you've verified the information, says a recent issue of the Federal Deposit Insurance Corp.'s monthly consumer newsletter.
• Home-improvement receipts: Until you sell the house, keep canceled checks, credit card receipts and cash register receipts for improvements such as remodeling, additions and installations that have added to the value of your property. Improvements add to the original purchase price or "cost basis" when you sell your house and that lowers your capital gains tax.
• Retirement and savings plan statements: Keep quarterly statements from 401(k) or other plans until you receive the annual summary, advises Bankrate.com, a leading online financial site. "If everything matches up, then toss the quarterlies. Keep the annual summaries until you retire or close the account."
• Medical bills and insurance records: Hemphill recommends keeping a file for each member of the family. "At the end of each year, I take out anything that tells me about health history and put that in a medical history file," she says.
• Warranties: Save until it expires or until you discard the product, says Hemphill, who saved $197 prorated against a new mattress using a five-year-old warranty.
Hemphill says there are no hard-and-fast rules about when to shred your documents. "The reality is our paper is our security blanket, and some people need a bigger security blanket than others," she says. "My philosophy is, when in doubt, keep it. I don't want people to be careless."
But, she adds, "an important message is, 'Today's mail is tomorrow's pile.' So start with today's mail, decide what you're going to keep and put it where you can find it."
SHEDDING PAPER
Barbara Hemphill's Web site, www.productiveenvironment.com, offers tips and resources for getting organized. For a free 30-minute consultation with an organizational expert, click on "Free Resources," scroll down and click on "Productive Environment Scorecard -- Individuals," fill out the scorecard and e-mail or fax it to Hemphill.
For more tips from the Federal Deposit Insurance Corp., see "Your Bank Records: What to Keep, What to Toss . . . and When" at www.fdic.gov/consumers/consumer/news/cnfall02/bnkrcrds.html.
For news, advice and the latest bank rates, see www.bankrate.com.
The Internal Revenue Service's Web site offers official forms and publications, and tips to taxpayers, at www.irs.gov. To order publications from the IRS, call 800-829-3676; to ask tax-related questions, call 800-829-1040.
Got questions? A consumer complaint? Helpful tip? E-mail details to oldenburgd@washpost.com or write Don Oldenburg, The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.
