May 20, 2024

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Tax Season is Over: What Documents to Save and What to Throw Away

Tax season can be a stressful time, but once it’s over, you’re left with a mountain of paperwork. Knowing what documents to save and for how long, as well as what you can safely throw away, is crucial for maintaining financial organization and compliance. Let’s dive into some guidelines to help you navigate post-tax season document management effectively.

What to Save and for How Long

  1. Tax Returns and Supporting Documents
    • Save: Keep copies of your tax returns and any supporting documents (e.g., W-2s, 1099s, receipts, deductions) for at least seven years. The IRS typically has up to three years to audit your return, but keeping records for seven years provides extra protection in case of an audit.
    • Throw Away: Shred any outdated tax returns and documents that are beyond the retention period.
  2. Financial Statements
    • Save: Retain bank statements, investment account statements, and credit card statements for at least three to seven years. These records are useful for tracking financial transactions, reconciling accounts, and providing proof of income or expenses.
    • Throw Away: Dispose of outdated statements once you’ve reviewed them for accuracy and reconciled any discrepancies.
  3. Receipts for Deductions and Expenses
    • Save: Keep receipts for deductible expenses (e.g., charitable donations, medical expenses, business expenses) for at least three to seven years, depending on the type of deduction and IRS guidelines.
    • Throw Away: Discard receipts for non-deductible expenses or items with no tax implications once you no longer need them for record-keeping purposes.
  4. Property and Investment Records
    • Save: Maintain records related to property purchases, sales, improvements, and investments for as long as you own the assets, plus seven years after selling or disposing of them. These records are essential for calculating capital gains or losses and determining basis.
    • Throw Away: Dispose of outdated or irrelevant property and investment records that are no longer needed for tax or financial purposes.
  5. Healthcare and Insurance Documents
    • Save: Keep records of healthcare expenses, insurance policies, and medical receipts for at least three to seven years. These documents are crucial for substantiating medical deductions and insurance claims.
    • Throw Away: Dispose of outdated healthcare documents or insurance statements once you’ve verified their accuracy and resolved any billing issues.

Best Practices for Document Management

  • Use Digital Storage: Consider digitizing paper documents and storing them securely in cloud-based storage or on external hard drives. Digital copies are easier to organize, access, and protect against physical damage or loss.
  • Label and Organize: Create a system for labeling and organizing your digital and physical documents. Use descriptive file names, folders, and categories to streamline document retrieval and management.
  • Regular Review and Purge: Schedule regular intervals (e.g., annually or semi-annually) to review and purge outdated or unnecessary documents. This helps declutter your records and ensures that you’re only retaining essential information.
  • Consult Tax Professionals: If you’re unsure about which documents to save or how long to keep them, consult with a tax professional or financial advisor. They can provide personalized guidance based on your specific tax situation and compliance requirements.

After tax season, knowing what documents to save and what to throw away is key to maintaining financial organization, compliance, and peace of mind. By following these guidelines and best practices, you can effectively manage your post-tax season documents and be prepared for future tax filings, audits, or financial inquiries. Stay organized, stay informed, and stay compliant for a smoother financial journey ahead.

OneAscent Wealth Management, LLC (“OAWM”) is a registered investment adviser with the United States Securities and Exchange Commission. OAWM does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by OAWM or any unaffiliated third party. OAWM is neither an attorney nor accountant, and no portion of the presented content should be interpreted as legal, accounting, or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

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