If you wrote something like “do anything,” you’re my kind of person. I am by no means a neurotically tidy record keeper, but I hate to search for misplaced papers because I would rather be doing something more pleasant.
If your tax records are incomplete, a random IRS audit could cost you money, time and perhaps sanity. You might be assessed additional tax because you cannot provide documentation to prove a large deduction. Divorces are another situation where good recordkeeping comes in handy — both financially and emotionally.
Record retention is no longer simply a matter of organized and neatly labeled file folders. Your records may need to be stored in more than one place and in more than one medium. In addition to file folders, you may need a safety deposit box, a home safe, CDs, DVDs, the Cloud, an encrypted hard drive, photographs, videotape or off site storage.
Create a system that works for you. This system should be secure, easy to maintain, and easily accessible on a weekly or monthly basis for periodic additions and retrievals. If you can make it pleasant, that’s a plus. Choose a system that protects your records from fire, water and smoke damage, insect or rodent chomping and thieves. If you are storing electronic media, be sure to have one or two back up copies. For every CD of records I have, I also have a second identical CD (in a separate location) in case the first CD is damaged or just too tired to work when I need it in a few years.
Records needing extra care in storage
Safety deposit boxes are good places to keep critical documents and back up electronic data. Items are safe and secure yet accessible when needed. A home safe is an option if it can protect your documents and electronic data from fire, water, gas leak explosions and other disasters.
Note: Never store your only copy of your will in your safety deposit box unless your loved one co-owns the box. Otherwise, your safety deposit box could be sealed when you pass away. That could leave your loved one or executor unable to obtain your will.
Safety deposit boxes and secure home safes are appropriate for the following documents:.
Social Security cards
Military discharge papers
Qualified Domestic Relations Orders
Wills and estate plans (see note above)
Stock and bond certificates
Real property deeds
List of personal property
Vehicle title documents
For records that do not need to be in a safety deposit box, store them where they are safe from damage. Keep files from the last six to twelve months in a location you can easily access. If you feel you need to refer to the documents that are in offsite storage such as a safety deposit box, keep a reference copy where you can reach it easily.
Next month, I’ll review other kinds of records and how long to keep them.