Filing Financials

By Staff, 01/9/18 10:06 AM

Managing Your Family Personal and Financial Records
When was the last time you could not find an important paper you knew you had carefully put away? Births, deaths, fires, annual taxes, and other life-changing events, all require specific paperwork and finding this paperwork in a minimal amount of time can be critical. Although some documents are only needed two-three times, having quick access to the document is important. Replacement of these documents could take months to replace when many times you need the information immediately.
Getting organized is not easy but is well worth the effort. Organizing and keeping records in a business-like manner can save time, trouble, money and frustration. It takes time and commitment to get family records in order and to answer such questions as where does our money go? How much do we own? How much do we owe?
Having an organized filing system is also important when preparing to file your annual taxes.
Before filing, the IRS urges taxpayers to file a complete and accurate tax return by making sure all documents are accounted for, including the previous year’s tax return. This includes forms W-2 from employers and forms 1099 from banks and other payers. Being organized will help avoid refund delays, penalties and the need to file an amended return.
Record-keeping systems can be as elaborate as a home office or as simple as a file drawer is. Simple filing cabinets, accordion folders, or even a storage chest that fits under the bed are inexpensive, yet efficient ways to keep documents. Records may be kept at home or in a safe deposit box at a bank.
Organizing a manageable record-keeping system starts with three easy steps:
• Knowing what records should be kept.
• Knowing where to keep records.
• Keeping records for the appropriate amount of time.
Home files should contain items necessary for family and household operation such as (1) information related to current years’ taxes, (2) medical records, (3) bills (4) insurance policies, (5) appliance warranties, (6) a copy of your will, (7) inventory of safe deposit box, etc.
Generally, these records, including appliance warranties, should be kept a minimum of three years or unless you still own the product. Older records and information can be in archived files, located in a safe, less convenient area of your home.
Electronically scanning some documents, such as older files you feel are important, can also eliminate clutter and be a safe way to store important documents. Investing in an external hard drive for your computer and regularly backing up important documents will allow you to carry away the external hard drive at a moment’s notice.
All records that are difficult to replace, or irreplaceable, should be stored in a safe deposit box. These items may include birth or adoption records, vehicle titles/bills of sale, death certificates, and marriage license. Safe deposit boxes are available at most financial institutions and offer an inexpensive, yet more secure option from fire and theft protection than most homes. Deposit box rental can also be claimed as an income tax deduction if investment documents or securities are stored in the box.
So how do you manage your files? At least once a year – tax time is a good time – sort through your active files and discard records you no longer need. These may include canceled checks not needed for proof of purchase or income tax purchases, receipts for groceries, clothing, and monthly utility bills. As you consider discarding personal and financial records, be certain you are disposing of them in way that protects your personal identity.
In most cases, the Internal Revenue Service (IRS) has three years to audit federal income tax returns. All receipts, statements, or other documentation for income tax purposes should be kept with the specific year’s tax records. Receipts are important because the IRS does not accept cancelled checks as payment proof. In unusual cases, this limit does not apply. If you failed to report more than 25 percent of your gross income, the IRS has six years to collect the tax and begin legal proceedings. There is no limit if you failed to file a return or willfully filed a fraudulent return.
Visit https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records for more information on how long you should keep your tax records. Visit www.uaex.edu for more information on setting up a personal record filing system or contact the Hempstead County Cooperative Extension Service at 870-777-5771 or email tjames@uaax.edu for more free financial management resources or to schedule a financial education program for your area.
The Cooperative Extension Service is part of the University of Arkansas System, Division of Agriculture and offers its programs to all eligible persons regardless of race, color, sex, gender identity, sexual orientation, national origin, religion, age, disability, marital or veteran status, genetic information, or any other legally protected status, and is an Affirmative Action/Equal Opportunity Employer.