How to Organize & Protect Your Vital Paper Documents

By ASR Staff,

You’re familiar with the scene. It happens every few years. Skyscrapers of paperwork built from old receipts, bill payments, tax returns and other slips of documentation accumulate on your desk. When the time comes to confront these mountains, simply digitizing and destroying every paper document you have isn’t always feasible since some documents you want to keep for practical reasons, others for legal purposes. With the sensitive nature of certain information in your files, and the ever-looming risk of identity theft, what do you do with this clutter of hard-copy records? Use these few sensible steps as a guide for organizing, protecting and destroying your important physical documents to reclaim your desk and ensure your privacy.

Divide, Classify and Conquer

Begin by sorting your documents into three categories: readily accessible, long-term storage and vital documentation.

  • The first category would include any paperwork that you will need in the near or immediate future, including tax receipts, W2s and donation records, as well as frequent necessities like your a copy of your driver’s license, credit card information, a copy of your health insurance card, bank account records and any special health documentation you may have, like blood type, allergies or health conditions. Also, place any files or notes for projects that you may currently be working on into this pile. 
  • Long-term storage documents include paid bills, correspondence, school and medical records, as well as wills, leases, insurance policies, military records, professional appraisals and contracts and social security records.
  • Your vital paperwork should be collected into a kind of emergency kit. Your kit should include any valuable documents which would be time-consuming or challenging to replace like citizenship or naturalization papers, original birth, death or marriage certificates, social security card and property titles. Keep these papers in a fire-proof lock box, a safe deposit box or a burglar-proof home safe. In the event of a fire or flood, your papers will survive and since in many identity theft cases the perpetrator knows the victim, you’ll want any files kept in your home to be secured.

When to Keep, When to Shred

A common inquiry that arises when sorting through piles of personal paperwork is how long should certain documents be kept. The Internal Revenue Service (IRS) requires that you be able to produce income, credit and deduction records for a minimum of three years from the original date of the return since the IRS can assess additional taxes to a submitted return up to three years after its submission. Keep in mind, though, that the IRS can request that you produce the same kinds of records for up to six years if they suspect you failed to report income greater than 25 percent of your gross income, and there is no time limit for the IRS to insist you verify that you did file taxes and no statute of limitation for suspected tax fraud. On average, experts recommend retaining your tax documents for a minimum of six years.

Purchase receipts that do not involve warranties and are over a year old should be shredded. You do not want to recycle any intact papers that indicate any part of your credit or debit card number. Old insurance documents and old bank account statements should also meet their fate in the shredder. Generally, mortgage lenders require three months of bank account statements, so any statements dating back further than that are unnecessary and potentially dangerous to keep lying around.

Digital or Hard Copy

Digitalization, cloud storage and DIY tax software saves space and makes accessing your files convenient, but it is not necessarily more secure than a hard copy in a secure location. Some individuals are not comfortable storing their personal data online at all. The decision to digitalize your documents is an individual one to be made based on your personal habits and preferences. Some experts recommend meeting in the middle by encrypting your files and storing them on a flash drive and then placing the flash drive in a lock box, secured file cabinet or safety deposit box.

If you do decide to digitalize, keep in mind that as far as the IRS is concerned, digital files must meet the same standards as physical documents in that they must be readable, accessible and legible, and it is infinitely important to back up electronic files in the likelihood of computer failure or malfunction.

Depending on your habits and how tall your paper stacks grow, you should evaluate your documents every one to three years. When the time comes to deal with those desk skyscrapers, use these tips to help you cut through your paper trail while protecting yourself from compromising your sensitive data.

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