Apr 15, 2021 Spring Clean Your Documents

With Shred Day approaching and in the spirit of spring cleaning, we wanted to share some tips on organizing your files. Remember to dispose of your documents securely. Below is a summary of the key documents to keep and for how long:

  • Income Tax Returns: Keep at least three years of state and federal tax returns and supporting documentation on file. Supporting documentation includes records that prove any income, deductions (including medical expenses), or credits claimed (W-2, 1099, end-of-year statements from banks and investment accounts). Depending on the state (like CA), you may need to keep tax returns for longer than three years. If you think you forgot to report income and it’s more than 25% of your gross income, keep six years of tax returns. If you are claiming a loss for worthless securities or bad debt deduction, keep records for seven years.
  • Gift Tax Returns: Keep all 709s that you file, and any 8971s or 706s issued to you, along with any supporting documentation in your permanent records.
  • Investment and Bank Accounts: Consider keeping the most current statements on file and the end-of-year statement until you complete your tax return.
  • Retirement Accounts: Consider keeping documentation on any contributions, withdrawals, and conversions. If you made non-deductible traditional IRA contributions, keep Form 8606 until the account is fully withdrawn to track cost basis.
  • Debt (student loans, mortgage): Keep the loan documents until the loan is paid off. Once the loan is paid off, keep documentation proving that the loan has been paid in full.
  • Property (automobiles, real estate): Consider keeping any deeds, titles, settlement statements, or bills of sale until you sell the property. Keep documentation showing purchase-related fees that were capitalized until you sell the property.
  • Home improvements: Keep any receipts related to home improvements as they may be used to substantiate any adjustments to the cost basis for your property.
  • Insurance policies: Keep the most current policies on file.
  • Legal Documents: Keep a copy of your Social Security card, birth certificate, passport, marriage certificate, prenuptial agreement, divorce paperwork, military discharge papers and employment contracts, as applicable.
  • Estate plan: Keep a copy of your Will, Trust(s), Powers of Attorney (General and Healthcare), Living Will or Healthcare Directive, and beneficiary designations on file, and store the originals in a safe place. Also, consider giving copies to people that play an important role in your estate plan, such as your agents, Executor(s) and Trustee(s).

It’s a good idea to make electronic copies of your important documents in case something happens to your paper files. Many of these documents like tax returns, supporting documentation, investment statements, bank statements, retirement statements as well as home improvement records can be stored electronically as long as they can be easily brought back up and are legible. Legal documents and estate planning documents should be kept both in paper and electronic format. Make sure your electronic documents are stored securely and backed up either on another device or the cloud.

Reminder: Shred & Meds Day is coming up and is the perfect time to get rid of those unneeded documents!

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Important Disclosures

Leonard Rickey Investment Advisors, PLLC (“LRIA”), is an SEC registered investment adviser located in the State of Washington. Registration does not imply a certain level of skill or training. For information pertaining to the registration status of LRIA, please contact LRIA or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov).

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