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Which Documents Should you Keep, Shred, and Scan?

July 25, 2022
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Technology has evolved, and you have too. Since technology has given us the opportunity to make organization a little easier, it’s time to really get to the bottom of the question, “which documents should you keep, shred, and scan?” 

In the case of an emergency, it is hard to take the time to think clearly about what documents you may need in the future. The good news is, technology has allowed us to digitalize everything. 

The only document that most likely needs to be an original copy is your birth certificate. That being said, a safe deposit box or a fireproof safe is your best bet for safe keeping. You should make your goal to digitize everything you can. From your social security card to tax documents, digitizing will help you in the long run. Not only will it be more organized, but it will save you the hassle if something were to happen to the physical documents. 

We understand that some of you will still feel the need to write everything down- and that is still an option. However, we advise for everything to be digitized as a precaution. If you are one of those people that prefers to write everything down, just ensure that you still have a backup plan in case those physical files were to be ruined.

Now that we covered the benefits of digital vs. physical, which documents do you have to keep and for how long? 

Regarding your tax documents, we recommend you keep those for 3 to 4 years on a rolling basis. The IRS has about 3 years to audit you and question your deductions. If the IRS starts to inquire about your write-offs, saving your tax documents gives you the ability to provide an itemized list of your purchases. For broker accounts or IRA contributions, you will want to save those documents for about 10 years. Reason being, if the IRS believes you underreported, they have a longer time to audit you. If you have a W2 form, you should keep that for 3-4 years. 

If you are a homeowner, you should keep those documents while you own the house, and for up to 3 years after you sell your home. Any home upgrades or capital improvements you do will reduce your cost basis, so we advise that you keep all receipts for tax purposes.

If there is a situation where you find yourself having to quickly grab what you need before evacuating your home, your driver’s license and passport should be the first things you take. When you go to replace important documents, your driver’s license and/or passport will be the starting point. You will also likely need access to your bank account. Once you have everything scanned on your computer, it is always a good idea to utilize the cloud for backup storage, like iCloud, Google Docs, etc.  This way you will just need the username and password to the account where you scanned everything to access your files. If you put everything on a flash drive, we recommend you keep that flash drive somewhere else that is not your home. For example, give it to a trusted individual to keep it safe for you, in case anything were to happen.

Between how long you keep these documents and where they are kept, you can save yourself a headache if you find yourself in the position of having to replace anything. To stay organized, learn how to file away everything in clearly named folders in your computer, and try to avoid hoarding documents. Stick to the time you may need them for, then toss what you do not need. If you chose to give a flash drive to a trusted individual, always make sure you know where the flash drive is located and always keep it up to date. It is vitally important to be organized, so throw out what you don’t need, and protect what you do!