Staying OUT of Trouble with the IRS

Ever wonder how long you should keep around all that paperwork about the washer and dryer you bought in 1978 and the car repair you had done on the car you sold 16 years ago? The IRS has its opinion and since I’m sure you completely trust the government to tell you exactly how to run your life, I guess this can be a short post. What?! You don’t trust them for that either? Hmmm…well, I guess we should discuss this idea briefly, then. What I’ve found works for me may not be what works for you, but it will give you an idea of some things you might try. I have a pretty simple system that follows these rules:

1. As much as possible, I sign up for e-delivery of statements. This means there is no paper trail to keep up with.
2. I pay as many bills online as possible. As I submit my payment and get the confirmation, I use CUTEPDF (the free version) to “print” the screen as a .pdf file and just save that on my computer. No paper, and the file sizes are small enough that I don’t worry about junking things up.
3. I have an expanding “accordion” file that I use to keep all important records I receive throughout the year, categorized by the following basic groupings: Electric, Water, Insurance, Auto Repair, Home Repair, Taxes, Misc. Keep, Temporary, Barry Work, and Stacy Work. In March, as I’m getting everything together to do our taxes, about half those records I’ve accumulated get tossed. March is the official, “don’t keep it if you don’t need to” month and here’s my method for stuff I kept throughout the year and what’s left:
   • If it is a utility bill (electric, water, phone, etc.), I throw away all the old ones I’ve filed except the most recent (January and February). If my lights are on and the water is running, I probably didn’t have any billing issues. 🙂
   • If it is a rebate, I keep all that paperwork until the rebate check/gift card comes.
   • If it is a warranty, I file that and keep it until I no longer have the product or until the warranty is way expired…just in case.
   • If it something related to work Stacy or I did, it will go with taxes, so it gets organized and kept.
   • For auto repair, I keep all the receipts for as long as I own the vehicle. When the vehicle is sold, I provide those to the purchaser as a “bonus” – he/she can keep track of all the service that was done. This is a BIG selling point.
4. If it is something – ANYTHING – I file with my taxes (whether I’m preparing balance sheets or the tax form itself), I keep all of that for at least eight years. Why? Because the IRS offers the general advice of keeping it for seven years and I want to play it safe. The packet of my tax stuff, when completed, is generally no larger than a regular shoe box and having eight or nine of those in storage isn’t a big deal. When it is time to get rid of one, I ritualistically burn it. Okay, so there isn’t any ritual, but I do burn it because there is lots of personal info in there.