Spring Cleaning Has Taken on a Whole New Meaning this Year

April 22, 2020

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Between conversations with our clients and watching my neighbors, it seems as if a lot of cleaning is getting done! Whether it’s the kitchen, the garage, the basement, or the office, people seem to be taking this “time off” to do more organizing and de-cluttering than they normally do. Once the physical stuff has been sorted, organized, labeled and crossed off the list, it may also be a good time to dive deeper.

In any other year but this year, we have completed filing our tax returns. This often begs the question about financial records – what should you keep, for how long, and what can you get rid of or shred?

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TIPS FOR CLEANING YOUR FINANCIAL HOUSE

Personal Tax Returns

How many years back? A good rule is at least six years.

This includes:

• all tax forms

• all supporting information such as investment statements, bank statements, proof of deductions, W-2, 1099s, charitable deductions, etc

• any records pertaining to capital gains and losses or carryover of capital losses

Generally, the IRS has up to three years to carry out an audit. If the IRS suspects that income has been misreported by more than 25%, it has up to six years to perform an audit. There is no statute of limitations for fraudulent filings. Old sales receipts or checks that may be necessary for the future calculation of capital gain or loss on an asset should be kept until they are no longer relevant.

Business Tax Returns

How many years back if you own your own business? The recommended time-frame here is ten years.

This includes:

• all tax forms

• all supporting information such as accounting ledgers, check registers, employment contracts and similar items mentioned above

The key is to use common sense when assessing what you should keep and what you can toss (ideally shred). Make sure you review the item’s importance. If it’s a keeper, store your records in a secure location. It is highly recommended to scan and save your information electronically as well on a secure website of device. As has been said, a record retained is better than a penalty gained!

Safety Deposit Box

Everyone has important papers that need to be kept almost indefinitely. These can include deeds, titles, marriage certificates, birth certificates, death certificates, social security cards, divorce decrees, copies of signed paperwork related to all your accounts showing whom you have named as beneficiaries, your insurance policies, your will, trust documents, passports, and other valuable items. It’s also recommended to take pictures or a video of these home items you just got done organizing! See, there was a reason to clean all that stuff. This is for proof of ownership if there is a theft or fire.

Bank deposit boxes use to be the recommended place to store these items. However, rules have changed in many states and the accessibility to these items may be more limited in the event of a death. Banks may be required to seal the safe deposit box until an executor can prove he or she has the legal right to access the information. It is also wise to scan these items to save electronically or at least a 2nd copy to save off-site at a family or friend’s home.

Personal Files

Organizing your person files and discarding old paper is a thankless task, but a necessary one. This is a good time to either create or clean-up what you have. There are a lot of ideas out there, but what works best is to keep it simple and know that it works for you.

Here are some basic ideas:

• Keep year-end statements of your financial accounts and utilities.

• Shred monthly or older statements you don’t need.

• Keep electronic and paper copies.

• Shred old credit cards.

• Have a separate file section for house repairs and a go-to list of professionals you have used for home and lawn items.

Review several items:

• Make a list of all your assets and accounts (including retirement accounts and any annuities) to confirm your beneficiaries - primary and secondary. If you don’t know, contact the organization and request a change in beneficiary form. If you are working with an advisor, they may already have this information for you to review.

• For your bank accounts, you can add a Payable on Death (POD) to your account(s). This includes jointly held accounts.

• Titles on cars and other vehicles should also have a designation and this can be accomplished by going to the BMV website.

• Deeds to property can be interesting. You may want to verify that if your property is owned jointly it is the correct form of jointly owned designation. Older deeds may be out of date. Adding a Transferable on Death (TOD) designation to single named or jointly owned property is often recommended by attorneys.

• Check your credit record and score or a regular basis to determine if it is correct or if anyone has tried to take out a loan in your name.

Hopefully this will get you headed in the right direction with your financial information. Of course it could all go up in smoke if you also don’t change the smoke detector batteries. Or, you may be awakened in the middle of the night by a loud beeping sound, because you need to change the batteries. Just speaking from experience. You may also want to get your sewer line cleaned so you don’t have an unwanted flood in your basement. Yes, this too is from experience. And while you are at it, check out replacing your filters – furnace, water, humidifier, etc.



Ideas for Your Personal Spring Cleaning

So often we give the objects in our lives more attention than we give ourselves. If anything, this time has given us an opportunity for self-reflection and self-care. Given the fact that our hair is growing longer and grayer (for some of us), it is time to be gentle with ourselves. In closing, we may have more time right now to get “things” done, but allow yourself some space for some personal growth as well.

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This material is distributed by Alexander Financial Planning, Inc. (AFP) and it is for information purposes only. Although information has been obtained from sources we believe to be reliable, we do not guarantee its accuracy. It is provided with the understanding that no fiduciary relationship exists because of this report. Opinions expressed in this report are not necessarily the opinions of AFP and they are subject to change without notice. AFP assumes no liability for the interpretation or use of this information. No portion of this writing should be construed as legal or accounting advice. All rights reserved.

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