So, I’m working at de-cluttering my home, and a lot of that clutter is paper. Part of the problem is that I don’t know if/how long I need to save things like already-paid bills and other statements. I’ve found websites that tell me about Very Important Paperwork, such as deeds, birth certificates, etc., but I’ve found nothing that mentions bills. Do I need to save old phone bills or credit card statements?
Also, do I need to save the whole carbon-copy checkbook, once it has no more checks in it? Or can I just shred that?
I really hope I can get rid of a lot of this stuff, because it sure takes up a lot of space!
Absolutely you do NOT need to keep billing statements. Only possible exception: if you pay in cash as some place, and they stamp the statements paid. Then you might want to keep them until the next month, to be sure that your payment was properly recorded by the company, but in that case you are keeping it as a receipt, not as a billing statement.
My system is: look at the new statement when it comes. Does it show the payment(s) you made last month? If so, you can toss the previous month’s statement. (If not, start finding out why.) Then check the new charges listed: are they correct? If yes, pay however much you intend to, write on the statement the DATE, AMOUNT, and NUMBER of the check you used, and file the statement until next month. (The reason you want the check info is in case a payment doesn’t show on the next statement – you at least know what check number and can start investigating what happened.)
As to the carbon-duplicates – do you get your cancelled checks back from the bank? Or photocopies of them? The only real use of the duplicates is to help you find which number of check to look for, in the case of a questioned payment. It’s easier to flip through a check register than a slew of loose checks. And if you don’t keep your checks themselves, you need a way to identify which check you need a copy of from you bank, again if there is a problem about your payment.
So take your choice: keep your cancelled checks OR keep the registers/duplicates. You don’t need both. Also, if you get your checks back, then there’s no need to keep the monthly checking account statements from your bank once you’ve reconciled them with your checkbook. But if they have the little photos of the checks, you can keep them and toss any checks/duplicate registers. Basically, you only need one copy of the info.
The other thing you should do is check to see what your bank, credit card company, and utilities have available online. I can call up my checking account statements and images of canceled checks going back many, many months. Most utilities make at least a few months’ worth of statements available online, which is all you’d ever really need, anyway. With things like credit card and brokerage statements, I just go online shortly after the statement closing date, and download the statement to my PC. As a result, I have almost no paper records at all.
Other than that, StarvingButStrong’s advice is dead on target. Once you’re satisfied that your payment has been received, there’s no reason to keep an old bill. Stop and think about it - what would you need it for?
Given that almost every bank now has extensive online information available, I’m puzzled about why anyone would pay extra for carbon-copy checks. Don’t remember what check number 2045 was for? Login to your bank, and pull up the image of the canceled check. Even without the images, you could at least check the details on your account, and see that check number 2045 was cashed two days ago, and that it was for $39.95.
Some people like to keep their utility bills for tax purposes. (What those tax purposes are, exactly, I’m not sure.) I know this because when I worked for the water department, I used to get a lot of frantic phone calls from the people who didn’t keep theirs, and needed to know right now how much they spent on utilities for the last 12 months.
But as a general rule, I’d say it’s fine to throw out an old bill as soon as the next one comes in.
Some people like to be able to show 12 months’ of utility payments if they put their home up for sale. A landlord might need them for tax purposes if the landlord pays the utilities rather than the tenant.
Some people save checks for tax-deductible expenses for several years. Otherwise, there’s no reason to save checks for merchandise or service that have been satisfactorily delivered.
I would suggest that in general you don’t need to save paperwork unrelated to your taxes for more than a month or two, 12 at most. (My wife has credit card statements in the basement going back 15-20 years, drives me nuts.)
The U.S. IRS can audit your taxes going back 3 years, 7 if there is cause to suspect fraud, so I can’t think of any reason to save anything at all more than 7 years.
Exception: if you own a house, you should hold onto any checks that have to do with improvements on the house – you can use them to save on your taxes when you sell the house, no matter how long afterwards that might be.
But that’s only for improvements, not routine maintenance and repairs. IOW, you save the payments related to the new wing you put on, or the conversion of your basement into a family room. Not for the new roof you had to put on or the stove you replaced.
Personally, around each February I go through all my cancelled checks from the previous year and toss the vast majority of them. Out go all utility payments, credit card payments, rent/mortgage payments. All payments for goods/services I’ve already received and cannot conceivably return (hotel stays, groceries, clothes I’ve worn.) This pretty much leaves me keeping only 1) medical related checks 2) charitable donations and 3) purchases for largish durable goods.
1 & 2 for tax reasons, 3 because sometimes you need it for warantees, but mainly for my own curiosity: when the dishwasher dies, I like to be able to look back and see what I paid for it and how long it lasted.
You need to check up on what the IRS considers a “capital improvement.” Putting a new roof on is explicitly listed as one of those “capital improvements,” which raises the capital gains basis on the house. The stove would also be included.
The list of what is, and what is not, considered an improvement that can be used to adjust your capital gain basis is not entirely rational, so it bears close examination. See IRS Publication 523 (a PDF file).