It's tax time, and that usually means it's also time to procrastinate actually doing your taxes. It also means it's time to confront all the paper records you've been filing and/or piling for the past year.
There aren't any hard-and-fast rules for record retention, which is why guidelines aren't particularly helpful, vary widely and are often unclear. To make matters worse, finding the files you need at tax time can be "taxing" to say the least. Most of what we file is never retrieved again, and we waste time trying to find the few documents we actually need.
In addition, files need to be reviewed regularly to purge outdated documents, and new files need to be made for each new category, a time-consuming and tedious process.
AVAILABLE SYSTEMS
If you have a business that requires lots of paper records (a law office, for example), Paper Tiger (www.thepapertiger.com) offers software that is designed to help you find anything in your office in "five seconds or less." It's pricey, however, and is overkill for most home and small service business needs.
The best system I've come across so far for basic household and small business filing is Freedom Filer (www.freedomfiler.com), a maintenance-free and self-purging filing system. The system is really just a kit of preprinted and blank color-coded labels and helpful instructions on how to file. The system is based on filing by how long you need to retain the document rather than by general categories.
The website also has more filing tips and retention guidelines.
DIFFERENT CATEGORIES
Here's a brief overview of how it works. Set up five different sections in your file cabinet:
❚ TAX-RELATED DOCUMENTS - For most households, these are income statements, home-maintenance re-cords, property and sales taxes paid, charitable contributions, education expenses, child- or elder-care expenses and miscellaneous deductions; these documents are kept for 10 years (this is excessive as most IRS documents need to be retained for seven years), based on the file-label system.
There is also an archive section for retaining tax documents for more than 10 years.
❚ PERMANENT RECORDS - Documents that support a person, property or other asset you own; for example medical records, manuals or auto-maintenance records. The shelf life of these documents is your lifetime or as long as you own the asset.
❚ REMOVE/REPLACE - Documents that are regularly updated, such as insurance policies. These are kept until the new one arrives.
❚ REFERENCE - This is where articles, recipes, maps, newspaper clippings, etc., are filed. These can be kept as long as you'd like.
❚ ROTATING FILES - Monthly statements such as credit-card and bank statements, cell bills, services and anything that doesn't fit in the other categories. These are automatically purged after two years.
FOR TRADITIONALISTS
For those who prefer the regular file-by-category method, there's FileWISE (www.filewise.com). You still need to maintain the files (add new file tabs regularly) and purge often to avoid a buildup of outdated documents - hence, why I recommend filing by how long you need to retain a document rather than by category.
But whatever your method, once you've got your filing system down, you will "feel right at home" at tax time!
Leah Stahlsmith owns Simple Works Design, providing home-staging and organizing services. For more information, visit www.simpleworks design.com.
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