Common Cents # 33 - Putting Away 2020

 

There are just a few weeks left in 2020, time to start putting it away. Just about everyone is looking forward to getting past the year 2020, but this should actually be something completed every year. I am talking about physically putting stuff in a box.

Sometime around the middle of December when the last bills are paid and into the first of January every year, we start gathering up the assorted pieces of paper representing the previous year. This includes receipts, credit card and utility bills, bank statements and the like. Anything that we will likely not need again goes in a box, or if we are fortunate, a large envelope. If we have moved much of our business online, we may not have many paper documents at all. Hold out anything that is multiyear, or that we may need for tax purposes. Items like receipts for things that may have a long-term warranty like a furnace or appliance should be stored another place for future access. Put auto maintenance receipts in a separate file labeled for that automobile for the day you need to know how old the battery is or when the brakes were changed last.

Gas receipts and everything that is basically done, can go in a box that we can seal up and reasonably expect to never need again. We then label the box “2020 Receipts – Shred in 2025.” It is always possible to keep these documents sorted in this way through the year, but it feels great one day in January to complete the task.

Tax returns are “live” or considered active for three years. If you are audited or need to produce a receipt for a claimed deduction, like a charitable donation or medical expense, it will be within three years. The IRS is now sending out letters requesting further information for 2018 tax returns, the ones we filed 18 months ago. 2016 tax returns are history unless a criminal investigation is ongoing and we’d likely know what that would be about already.

With that in mind, five years is plenty long enough to keep any receipts that don’t involve long-term consequences. Some business expenses such as major equipment that is being depreciated or the roof on your home or a rental house, you can decide to keep the paperwork longer or file them differently to make these easier to access.

With the old receipts safely in a sealed box, we can put them in long-term storage such as on a shelf in the basement. Then pull out the oldest box, the one that says, “Shred in 2020 or 2021.” These are the ones from 2015. Take the oldest box to a commercial shredder if you do not own a cross-cut shredder. UPS stores, Staples, and many other places will shred your documents for about $1 per pound. If you have not needed to see these receipts or statements in five years, you won’t.

Don’t just pitch the old records in the trash because they likely contain account numbers, bank information or other personal information that you don’t want to fall into the wrong hands. A large number of scams or frauds are started with thieves just going through someone’s trash. A shredder will dump your documents in a machine and confetti comes out the other side. You are now good to go and get on with your life in the exciting new year!