Another tax season has passed us by. Perhaps it’s time to declutter the dreaded filing cabinet that holds many years’ worth of statements and sheets of paper! Have you opened your filing cabinet to find old utility bills or medical records or tax returns? It’s possible that many of these documents could be scanned and stored in the cloud. It’s also possible that many of these documents can be shredded, as they’re no longer required to be in your possession if it’s been a certain number of years.
For instance, tax documents (returns and supporting income/deduction records) only need to be kept for three years from the date the original return was filed. Refund claims may be different, you can find information on that here. Thankfully, in the event of an IRS audit, digital copies of these records will suffice and free up your filing cabinet.
Homeowners should keep documents related to home improvements, as you may need these records to determine your cost basis when you sell. Keep in mind that home buyers can request to see one year of a seller’s utility bills. So, if you’re looking to sell, you may want to keep those receipts during that time.
Estate-planning documents are important. These include anything from trust documents to powers of attorney, to wills. Even more important, a physical copy of a person’s will is the only document that must be kept as a hardcopy. This will save you from a headache later of having to jump through hoops in court to prove it is valid. A will is considered revoked if it has been torn up or destroyed, so it’s best to keep a hard copy and let someone know where to find it.
Documents like bills, receipts, and financial statements should be available online on almost any platform. If that’s the case, you should not feel obligated to keep a physical copy. It’s important to note that some banks will not keep records for more than a certain number of years, so you should check with your bank to find out how long that is.
Vital and legal records like birth certificates, marriage licenses, adoption papers, or property deeds should always be kept in their original form. However, keeping a digital copy would not hurt.
So, you may wonder, how do you digitize your documents? The Wall Street Journal recommended these safe and accessible services:
- Apple’s Notes app in the iPhone allows you to scan documents to be saved in a cloud account or on your phone.
- Purchase an all-in-one printer that also copies and scans. If it has a built-in sheet feeder, it will make your life easier.
- Download your statements from banking or insurance or utility websites. Once you have a digital copy, keep this in a cloud account or somewhere on your computer.
- Utilize one of the many cloud services like Apple iCloud, Google Drive, Microsoft OneDrive, Dropbox Vault, or Evernote.
Finally, remember to secure the place you have chosen to store your digital documents. It is recommended that you enable two-factor authentication to protect your accounts, and the services listed above all offer that crucial feature.