Records Management at Home

We spend most of our time talking about the proper management, retention, and disposition of university records, but records management also has a place outside of work.  You know that overstuffed file cabinet or that old computer you have at home?  Records management can  help you tackle them as well!

Jennifer Saranow Schultz of the New York Times recently wrote an article titled “Retain Your Records No Longer Than You Must”.  She consulted with people in the financial, medical, and privacy rights industries to get some guidelines on how long to keep tax forms, utility bills, Explanation of Benefits from the insurance company, as well as many other documents most people have at home.

The answers she got may surprise you.  Utility bills?  Well, unless you need them for tax deduction purposes, there’s no reason you need to keep them once you get the next bill that confirms you paid the previous one.  Do you have piles of bank statements?  Again, unless you need them to prove income they really only need to be retained as long as your bank allows you to challenge any inconsistencies or errors.  Review them on a regular basis and contact the bank right away if there are any errors.  Otherwise, the experts Saranow Schultz interviewed recommended only keeping them for a year.

And everyone knows that tax records need to be kept for seven years, right?  Well, actually, that’s not entirely true.

The IRS does have 3 years after date of filing “or date of payment” to audit your tax return.   However, by statute there is a finite list of exceptions to the 3 year time frame. These include:

  • False Return – Tax may be assessed at any time, without limitation.
  • Willful attempt to avoid tax – Tax may be assessed at any time, without limitation.
  • No return – Tax may be assessed at any time, without limitation.
  • Extension by Agreement – Assessment period defined by agreement between IRS and taxpayer.
  • Tax resulting from changes in certain income or estate tax credits – No timeframe defined.
  • Tax resulting form distributions or terminations from a life insurance company – 3 years
  • Termination of private foundation status – Tax may be assessed at any time, without limitation.
  • Substantial omission of items (generally defined as over/under reporting of income by 25%) – 6 years.

These Limitations of Assessment and Collection are defined in federal law. For more information,  see 26 USC 6501.

It’s typically that last bullet point that people use to invoke the seven year retention period.  The year of filing plus six years just in case you forgot a huge chunk of your income.  But for most people, 3 years should be sufficient for all the documentation used to prepare their taxes.  Although Saranow Schultz’s experts suggest keeping the actual tax return forms permanently.

So, while there are some records that experts suggest keeping permanently (legal decision paperwork and wills to name two), most records in your house could safely be disposed of after a limited period of time.  And regardless of how long you keep them, remember to store them in a safe place.  Avoid keeping them online or in email and remember to periodically check to make sure you can still access the information on that old computer.  If you can no  longer open the file then keeping it isn’t doing you much good.

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