How to Handle the Tax Documents Piling Up Right Now

By now, you’ve probably received a series of emails and letters marked “important tax information enclosed,” along with year-end investment statements, and there are more to come. These documents are essential for filing your 2018 tax returns, but once you’re done with that, what’s next?

At HumbleDollar, Ross Menke recommends a system of categorizing your personal and financial documents into three “buckets,” based on their significance and legal requirements:

Permanent Documents

This category is reserved for documents that would be extremely difficult to replace, such as those belonging to you (and your family members):

• Passports

• Birth certificates

• Social Security cards

• Property deeds

• Vehicle titles

• Marriage certificates

• Wills

• Powers of attorney

• Tax returns

• Life insurance policies

• Medical receipts if you have a Health Savings Account (HSA), since, as I mentioned yesterday, you can claim medical expenses from later years)

Another document to include here, according to Menke, is Roth IRA contribution history. “You can withdraw your Roth IRA contributions at any time, without taxes or penalties,” Menke explains. “It’s important to track how much you’ve contributed, as it might be hard to remember that amount 20 years from now.”

Supporting Tax Documents

This category covers the mail you’re currently receiving. The IRS recommends keeping any tax-related documents and supporting information for three to seven years, including:

• W-2 forms

• 1099 forms

• Documentation for any deductions you claim

If you don’t file a return, hold onto them indefinitely (though you’ll probably have more pressing issues than misplaced paperwork).

One-Year Documents

This category, according to Menke, is meant for other types of records:

• Monthly bank statements

• Credit card statements

• Utility bills

• Pay stubs

There’s no real need to keep these for more than a year. Now, where should you store all these documents? We have some suggestions here. Another option, especially for those important long-term documents, is to use a safety deposit box or a fireproof safe, as Menke advises.