Keep your home office tidy with this guide on paper organization.
Store Records Electronically
The best advice from CPA Jocelyn Fong is to save your digital files and keep them in order by year for 7 years. At the end of every year it is important to download and save your documents online via cloud and/or a hard drive. It is a rookie mistake to rely on banks to retrieve records, as most banks typically only keep files for 3 years.
It is also a smart idea to take photos (or scan), copy, and convert paper documents into a digital format. You can save these documents on a hard drive or in a secure cloud like google. This allows you to save important documents and access them remotely in case of a natural disaster or emergency.
Prevent Identity Theft
Is the google cloud safe to store tax documents? Yes. I recommend using a password that is unique to this specific account. Do not use the same password as shopping, socials or other personal websites.
Dispose of physical old tax documents, statements, or any papers with personal information by shredding. Do not simply toss in the trash. Although identity theft mostly takes place online these days, it is best to be extra cautious.
How long do I keep my tax records?
Seven years if you want to be safe and protected from a potential audit. Again, I highly recommend saving all files in a digital format with your files in order.
If I own a business, how long do I keep receipts?
Seven years unless the California Department of Tax and Fee Administration gives written authorization for earlier disposal. This includes all records involving sales or use tax liability. This is particularly important if they are itemized receipts.
Should I keep divorce papers?
It is in your best interest to retain any and all documents related to your divorce, forever.
Personal Documents to Keep
One year
- Paychecks
- If you have no equity you can save one paycheck per a quarter
- If you have equity save every paycheck for the year
- Cancelled checks
Three years
- Medical bills (if there is a deduction save for 7 years)
- Expired insurance policies (car/personal)
Seven years
- Expired insurance policies (renters insurance, etc.)
- Supporting documents for tax returns
- Accident claims and reports
- Tax related medical bills/bills
- Sales receipts
- Property records/improvement/renovation receipts
- Mortgages, deeds, lease documents
Forever
- CPA reports
- Legal documents
- Estate documents
- Income pay checks
- Income tax returns
- Investment trade records
- Retirement records
Special Circumstances
- Car records (as long as you own the car)
- Stock and bond records (7 years beyond selling)
- Warranties and manuals (only keep if you still have the product)
- Depreciation schedules and capital asset records (3 years after the tax life of the asset)
Personal Documents to Digitize
If you haven’t already, please opt-in to paperless settings. Typically, these papers end up compiling in piles causing more stress than good. You should be able to access all of your statements online, where the data is aggregated together.
- Bank statements
- Credit Card statements
- Retirement contribution statements
- Utility bills
Business Documents to Keep
Seven years
- Purchase orders
- Deposit slips
- Requisitions
- Receiving sheets
- Employee applications
- Employee records (after termination)
- Employee time cards
- Internal reports
- Inventory log
- Expired insurance policies
- Accident claims/reports
- Employee tax records
- Expired contracts/leases
- Inventory logs
- Payroll records
- Purchase orders
- Sales records
- Vouchers
- Travel/entertainment records
Forever
- Audit reports
- Cancelled checks (tax payments)
- Contracts
- Leases
- Deeds
- Depreciation schedules
- Investment trade confirmations
- IRS reports
- Legal records/correspondence
- Mortgages, bills of sale
- Property records
- Retirement records
- Tax returns
- Trademark/patent registration
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The information here is sourced from the Franchise Tax Board, California Tax Service Center, CPA Rod, and CPA Jocelyn Fong.
