By Reid Johnson, President, Lake Point Advisory Group

In addition to taxes, the first quarter also gets us thinking about another annual tradition: spring cleaning. If you’ve spent significant time digging through paperwork to find important documents lately, it might be time to toss some old files.

An Important Piece of Advice

But please, before you think about what paper can hit the recycling bin, ensure that you are shredding, and in either a cross-cut or confetti style, as ribbon-cut documents can be put back together by someone hoping to steal your information.  If it’s been a while since you cleaned out your paperwork, or if you don’t have a shredder of your own, seek out a professional shredding company in your area.

Bookmark this list to keep it handy as you streamline your important paperwork, and if you have any questions, please don’t hesitate to contact us directly.

Keep

  • All of your annual tax returns (supporting documentation is something you can trash after three years)
  • Records showing how much money went into and came out of IRAs and 401(k)s — especially if you’ve made any nondeductible contributions — so you don’t overpay taxes when you withdraw the money. Keep any 8606 forms on which you reported nondeductible contributions to traditional IRAs.
  • Save records pertaining to any homes you own, including records showing purchase price and receipts for home improvements. If you sell the home for a substantial profit (more than $500,000 for couples filing a joint return or $250,000 for single filers), certain expenses can be used to lower your tax liability on it. After you sell the house, keep these records for three years.
  • Keep records that show the initial purchase price for stocks and mutual funds so you can calculate your basis when you sell them. After that, you are able to shred the documents once the three- or six-year IRS window that pertains to those stocks closes.
  • Statements of paid mortgages

Toss After Three Years

  • Medical bills and cancelled insurance policies
  • Receipts, cancelled checks and other documents that support income or a deduction on your tax return (keep three years from the date the return was filed or 2 years from the date the tax was paid, whichever is later)
  • Annual investment statements (keep for three years after the sale of your investment)

Toss After One Year*

  • Paycheck stubs
  • Utility bills
  • Cancelled checks
  • Credit card receipts
  • Bank statements
  • Quarterly investment statements (Hold on to until you get your annual statement)

*If you are using these items for a specific tax deduction or purpose, then keep for three years after you’ve filed that return.

Here’s something else to keep: your long-term financial strategy, which should be customized to you and your family. Let’s talk about it today. What to toss? No doing enough to manage your money.  Let’s create that list together.

– Reid Johnson is president of Lake Point Advisory Group, where is dedicated to providing his clients with the professional and individual attention necessary to help them achieve their financial goals.

To schedule a complimentary meeting with Reid Johnson or another member of Lake Point Advisory Group, please call 214.771.3363 or email service@lakepointadvisorygroup.com.