For better recordkeeping, give overstuffed shoebox to the cat
The post office scarcely had a moment to catch its breath after the deluge of Christmas cards when the Internal Revenue Service dropped off millions of 1040 forms and instructions. Now what do you do with that 1040 until you're ready to fill it out? Why, put it with your other important and well-organized records and documents, of course.
Or, you could stuff it in a shoebox with everything else. For some people, the bulging shoebox or overstuffed desk drawer works. Somehow, they can find everything they need when they need it. Maybe no one else in the family can, but that hasn't been a problem so far. For others, the chaos filing method means they can never find anything when they need it.
If you're in either of these groups, you might want to get things organized before tax time.
You can start by taking an inventory of your important records to find out what you have, where it is, where it should be, and hunt down or try to replace any missing papers.
One reason those shoeboxes and drawers more often resemble wastebaskets is that some people keep everything; they don't know what to keep and they can't find what they need in the mess. Bills from gasoline companies and department stores, for instance, can pile up quickly. You can keep the pile small by throwing them out as soon as your payment is properly credited. Keep credit card statements showing finance charges, though; interest is still fully deductible from 1986 income and it will be partly deductible through 1990.
Anything to do with taxes, including bills backing up home office deductions, medical expenses, subscription statements for investment publications, and bills for safe deposit box rental, should be kept at least three years. This is the usual audit schedule for federal income tax returns. Fraud, however, is another matter. Federal and state tax collectors can look into suspected fraud for several more years.
In the next few years, some of these papers will become less important, as deductions for things like magazines, investment advice, and safe deposit boxes will be greatly reduced.
Whether or not you can deduct rent for a safe deposit box, you should still have one for some of your more important papers. Stocks and bonds, mortgage documents, loan agreements, automobile titles, birth and marriage certificates, and military service records probably belong in one of these boxes.
Wills and insurance documents may go there, too, depending on state laws and whose names are on the box. In some states, safe deposit boxes are sealed immediately upon the death of the renter, making it difficult for family members to get at important papers at a difficult time. If more than one person can get into the box and has a key to it, however, this should not be a problem. Check with your bank about its policy and local laws in this matter.
Some of the more often-used papers in the safe deposit box should be photocopied and the copies kept at home. A loan agreement or stock certificate, where you might need quick referene to dates or money figures, might be copied.
For documents you keep at home, you might want to buy one of those metal filing boxes, a strongbox, or just use a desk drawer with manila folders. Whatever you use, it should be handy enough that you will use it often and put receipts and bills in it as soon as they come in or as soon as they are paid.
Current records to keep at home can include medical (or practitioner) and dental bills, receipts for furniture, automobiles, and appliances, and expenses related to investments or business.
The file should also contain an up-to-date record of loan and mortgage payments, including the dates of payment and check numbers.
Nearby, find a place for bank records for the current year, including statements, bank books, deposit slips, and canceled checks. Statements on securities transactions, such as confirmation slips and monthly or quarterly statements, also belong here.
Whether all this material is organized by date, alphabetically, or by category is immaterial; as long as it works for you and as long as you (and others in the family) know where things are and how they're organized, getting at things when they're needed should be easy.
Once you've found a place for everything and put it there, make a list of it all. The inventory should show what's in the safe deposit box, what's at home, and phone numbers of financial advisers, including your accountant, lawyer, stockbroker, and insurance agent.
Make a separate list of other important numbers like your social security number, and numbers on insurance policies, bank accounts, securities, and credit cards. For safety, it might be a good idea to keep separate copies of both of these lists.
When you're all done, the old shoebox may still be useful for something. Cats love to sleep in them.
If you have a question that would make a good subject for this column, please send it to Moneywise, The Christian Science Monitor, One Norway St., Boston, MA 02115. No personal replies can be given.