Are you worried about losing important financial documents while decluttering your office?
Financial documents hold all the financial and business activity information of the owner. It contains the product or service acquired, the date of transaction, and the names of parties. Thus, it’s necessary to save these documents.
However, you can discard your important documents after some time. Keep reading to find out how long you should keep your financial files.
1. Tax Return
A tax return is a form you fill in with information about your income. It consists of your annual income, interests, expenses, and other profits. A tax return allows you to compute your tax liability to the government.
You must keep your tax return document for three to seven years. The IRS suggests holding on to these documents for 3 years from the date you filed your original return. Keep it for 7 years if you claimed for worthless securities.
2. Bank and Credit Card Statement
A bank issues a bank statement to the account holder every month. It presents the financial activities of the holder: deposits, withdrawals, and expenses. This allows the account holder to track their financial transactions every month.
A credit card is a credit line you can use to buy or for cash advances. Then, you pay for it every month, according to the contract. A credit card statement covers all transactions the borrower made.
It’s necessary to keep financial documents, such as your bank and credit card statement for some time. They’ll serve as evidence to prove transactions happened.
You can keep this document for up to three years if IRS audits you. If you wish not to clutter your office, consider paperless statements.
3. Receipts – Big Purchases, Medical, and Utility
A receipt acknowledges the transfer of ownership from one to another. It proves a client received the service, too. A receipt shows the product or service acquired, the amount paid, and the date of sale.
Keep receipts for big purchases, medical bills, and utility bills.
If you purchased a car, it should come with a factory warranty. The agent will ask for the official receipt issued to avail warranty. The official receipt issued serves as proof of acquisition.
You can discard your receipts, medical, and utility bills after a year to 3 years. Keeping it for a year may come in handy for proof of payment. Your insurance company may ask for your medical expenses.
It’s necessary to keep vital financial documents for three years for your tax records.
A paystub is a document holding the information of an employee’s pay. It includes the gross salary, deductions, tax paid, and net pay.
Keep your paystub for at least a year. Your paystub will serve as proof of income in case you buy expensive items. You can check if there’re any errors, and it helps for tax filing.
You can discard your paycheck stub once you get your W-2 form. Consider getting a paystub maker to customize your paystub. It also generates more accurate data for you.
Keeping Your Financial Documents
You now know when to throw your financial documents to avoid clutter. Saving documents for a certain amount of time may be beneficial to you. Important financial documents may serve as proof of payment, income, and more.
Want to know more financial management tips? Check out our other blog posts for more guides.