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Get Organized but Don't Shred These Records

A popular New Year’s resolution is to get organized by cleaning up household clutter and shredding unwanted documents.  But beware - there are important records that should not be shredded.  It’s understood that some documents need to be retained for life, including birth certificates, social security cards, military records, marriage and divorce records, advanced medical directives, deeds, wills and trusts.

Here are other key records that need to be retained to save time, money, and problems in the future:

Retain records that give proof of ownership and purchase price in the event of natural disaster, flood, fire, theft or death.  These documents will be requested in case you need to file an insurance claim or to determine the assets of an estate.

Retain records to determine the adjusted basis when a home is sold.  The adjusted basis will be used to calculate a gain or loss on the sale of a home and help determine if any income taxes are owed.  In addition to retaining records to provide proof of purchase price and expenses, keep records that increase or decrease basis.  These include records for any home improvement or expenses incurred to repair damage to the property in the event of casualty lose.

A qualifying home improvement must have a useful life of more than one year and still be in use at the time of sale.  Generally, a home improvement must add to the home’s value or prolong its useful life.  These include expenses for installed satellite dish, security system, additions, heating and air-conditioning, insulation, lawn and grounds, swimming pool, and interior improvements, among others.  Records that demonstrate proof of payment include cancelled checks, financial bank statements, credit card statements, and cash receipts.

Retain records related to an Individual Retirement Account (IRA.)  Keep all records until the last distribution is made from the account and the balance is zero.  These include all financial institution documents and IRS forms that show deductible or nondeductible contributions made, distributions received and the value of the IRA.

Retain records that will help determine the adjusted basis for when an investment is sold.  The adjusted basis will be used to calculate a gain or loss on the sale of an investment.  In addition to keeping the trade confirmation giving proof of purchase price and commissions paid and sales price, keep records of reinvested dividends, stock splits and dividends, load charges for mutual funds and original issue discounts. 

For additional information on record retention for income tax purposes, please consult a tax advisor and refer to IRS publication 552 – Record Keeping for Individuals.



Christine Parker, CFP®

Personal finance expert for women, Christine Parker, CFP® is president of Parker Financial, LLC, a registered investment advisory firm in the state of Maryland.  The information contained herein should not be viewed as Parker Financial, LLC providing investment, tax or legal advice.  Before implementing any strategy, please consult your accountant, legal counsel and financial planner.  For more information, call toll-free 866-681.PLAN (7526) or visit http:/

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