The Paper Magnet

Step-by-Step Guide to Organizing Your Financial Documents

Even though we are in the Digital Age, paper remains a constant in our lives. While junk emails have replaced junk snail mail (trees happy, inboxes…not so much), one of the major paper generators of all is personal finances. Last summer my husband and I sold and then bought a home—the amount of paper those two transactions took was mind-boggling. We all have bank records, loans, credit cards, and utilities…and that is just the beginning. So much of our money-related information enters our homes as paper! Organizing paperwork can definitely be overwhelming. Let these guidelines help you get your financial documents in order.

Review what documents you have.

Before you can organize your documents, go through them and see what you have. Organize them into categories, such as To File, To Shred, To Read, To Pay, and Needs Action. You may discover unpaid bills, receipts for tax deductions, and all sorts of other paperwork you didn’t realize was in that big stack. If you’re uncertain about what to keep and what to shred, refer to our thorough guide on paper retention.

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Get Started on Your Taxes Now

This year the IRS began accepting tax returns on January 24, 2022; this is earlier than the usual February. The deadline to file your 2021 taxes is midnight on Monday, April 18, 2022. That date will be here faster than you think. Don’t hold off any longer—the time to file is now. According to the IRS, 20-25% of Americans wait until the final two weeks before the deadline to prepare their documents and file. The sooner you file, the less likely you will need to file an extension or pay a fine.

Here are seven reasons to get started on your taxes today:

  1. By the end of February most financial institutions have mailed out their respective tax documents. You should have all your documents gathered and organized. If you think you are still missing something (e.g., a document, form, or receipt), call the appropriate person to get that item sent to you right away. Tip: an email with the attached file is much quicker than the U.S. Mail.
  2. If you think you may be entitled to a stimulus payment, filing your taxes early is likely the quickest way to secure those funds. In March 2021 lawmakers approved a $1,400 stimulus check, but some people did not receive it. For instance, if your wages changed in 2021, you may have been eligible for a stimulus check without realizing it. Taxpayers who didn’t receive a stimulus payment, or who didn’t receive the full amount they were owed, may claim the missing funds through the Recovery Rebate Credit on their 2022 taxes.
  3. Tax preparation professionals will once again be busier than ever this tax-filing season. As soon as you have all your documents, submit them to your tax professional. Don’t procrastinate on this; even CPAs have to get extensions if they can’t file your taxes in time.
  4. There is a penalty for not filing your taxes by the deadline. This penalty is harsher and different from the penalty for failure to pay what you owe by the deadline. You should file taxes on time even if you are unable to pay all the taxes you owe by the due date.
  5. Get ahead of the fraudsters! Another advantage of filing early if you expect a refund: It helps ensure that you claim your money before fraudsters have a chance to claim it in your name.
  6. Don’t forget that tax refunds are your money! Why wait any longer than necessary to claim it? You’ll feel much better knowing it’s in your bank account, and not the government’s coffers.
  7. Filing your tax return now and checking that off your to-do list is one more way to lighten your load. No more thinking about taxes for at least another 9 months!
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What to Save and What to Shred: Paper Retention Guidelines

Even with many day-to-day tasks moving online, there will still–and always be–paper. The average American receives almost 50,000 pieces of mail in their lifetime, and 30% of it is junk. No wonder so many of us have piles of paper items that can quickly accumulate if not taken care of. You want to tackle the stacks of paper on your desk, but you’re not quite sure how to start? Our guidelines will help you know what to save, what to recycle, and what to shred.

The Simplify Experts Paper Retention Schedule:

  1. All tax returns are to be kept; receipts need to be kept for the last 7 years of returns only.
  2. Bank statements only have to be kept for 3 years unless a key component in your 7 years of tax receipts.
  3. Financial Brokerage accounts – keep the current year statements. At the end of year, save only year-end and tax related forms. Trade confirmations need to be kept to prove the original price of the stock when purchased until sold. Keep trade confirmations in a labeled manila folder with your tax receipts.
  4. Keep all medical billing statements and prescription receipts for the year should you incur large medical expenses for that year and have enough to claim a tax deduction. If you did not meet the medical claim amount for your income, than shred all medical billing at year-end.
  5. You only need a couple months worth of utilities unless you run a business out of your home and are writing off a portion of those expenses to your business.
  6. If you believe you will be doing a wealth of improvements to your home for the life of your home, keep all home improvement receipts for capital gains tax when you sell the home.
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