Family finances: It’s a paper world, so dispose of documents securely

By Alan Lavine and Gail Liberman

3/10/2006 – Family finances: It’s a paper world, so dispose of documents securely
Friday, March 10, 2006

By Alan Lavine and Gail Liberman

Do you have as many boxes full of old tax returns and documents cluttering your attic as we do?

We have some 25 boxes of family records we’d love to get rid of because we have no more room.

What to do with it all?

Keep records that you refer to regularly, such as bank statements, canceled checks, bills and tax-deductible items, in an active file. Other records, such as tax returns, may be put away somewhere. We hope you have a lot of space.

To avoid storing unnecessary paper each year, decide which records to keep and which to toss.

Here are some tips.

Permanently keep certificates of birth, marriage, divorce and death. Also, records of military service, adoption, naturalization and medical records.

Personal statements, such as preferred funeral arrangements, should be dated and a copy provided to a close friend or relative.

For tax purposes, papers documenting a home purchase or improvements should be kept as long as you own the property or are rolling over profits into a new property.

Housing and investment records, such as titles, deeds, trust arrangements, and power of attorney documents should be kept as long as the agreements are in effect.

Receipts and warranties for major purchases should be kept as long as you own the item or until the warranty expires. We staple receipts to instruction manuals.

Tom Ochenschlager, vice president at the American Institute of Certified Public Accountants, suggests keeping records of any investment’s cost until six years after you’ve disposed of the investment.

Tax records, such as federal and state income taxes, gift and estate tax returns, should be kept for at least six years after filing. The IRS has three years from the time of filing to assess additional taxes.

But that can be extended if you substantially underreport income or if you have a fraudulent return.

How to destroy personal records?

Mr. Ochenschlager suggests a $20 to $40 cross-cut shredder that you can put on top of a waste basket. He recycles shredded documents under leaves as garden mulch.

Have too much to shred? Consider a mobile shredding company.

One service we called to haul away our 25 cardboard boxes holding 8.5-inch by 11-inch documents, said it would charge $150 to come to our home. The price drops to $75 if they haul away the boxes and shred documents at their facility. But do you really trust a service to do that?

Here’s what to consider when hiring a shredding service:

Is the shredding contractor certified by the National Association of Information Destruction, Phoenix, Ariz. (www.naidonline.org). NAID certification means the service has been audited by a third party to verify company security practices.

Request and check references.

Determine how long the company has been in business.

Find out whether the charge includes hauling away empty boxes. Many charge by the minute with minimum charges that can run at least $100, so get an estimate of the time involved. Probe for additional charges.

Check for complaints against the company with the Better Business Bureau or www.ripoffreport.com.

Get written confirmation that your documents have been shredded.

Mr. Ochsenschlager suggests filing income taxes electronically. Or, ask your accountant to scan your return and put it on a CD or disk. Some tax software vendors arrange for you to file electronically for free. H & R Block says that electronic filing is free with its tax preparation, which averages $155.

Filing your own returns? If your adjusted gross income is $50,000 or less, you can file electronically for free through the IRS “Free File.” For more information, visit www.irs.gov. Keep a copy of your return on a CD or disk

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