A CPA’S Guide To Smart Recordkeeping
Texas CPAs Give Tips for Organizing Your Financial Records in 2004

DALLAS — In the event of a personal or financial emergency, having organized records will save time, money and frustration. According to the Texas Society of Certified Public Accountants, the key is knowing what to keep, where to keep it, and for how long.

LOCATE AND STORE VITAL DOCUMENTS

Documents that are difficult to replace, such as birth certificates, marriage licenses, divorce decrees, records of military service, citizenship papers, and adoption records, should be kept in a safe deposit box at a bank. For added protection, you should retain a list and photocopies of the items that are stored there. An alternative is keeping documents in a home safe that carries a “ul class 350” fire resistant rating.

Passports, Social Security records, and stock, bond, and mutual fund certificates should also be stored securely, as should property records like deeds, titles, and mortgages. Wills and insurance documents should also be kept in your safe deposit box, but be sure to keep copies available and let your executor or next of kin know that your will is there.

KEEP ACTIVE FILES CLOSE AT HAND

Keep items that you refer to regularly, such as bank, mutual fund, and other investment-related statements, close at hand. You’ll also want to store all your utility, credit card, lawn maintenance, property tax and other bills in a readily accessible place.

WHAT TO STASH AND WHAT TO TRASH

CPAs say that the nature of the document determines how long it should be kept. For example, old utility, credit card, and other bills can be discarded once you have verified that they are correct. There’s no need to keep car titles or most other property documents once you’ve disposed of the item.

If your mutual fund company or brokerage house provides a year-end summary report of your transactions, there is no need to keep monthly or quarterly statements once you’ve checked that they are accurate. However, hold on to all your buy/sell trade confirmations, since they contain information needed for completing your tax return and retain indefinitely records documenting retirement plans and individual retirement accounts.

Tax records, such as federal and state income tax returns and supporting documentation should be kept at least six years. Here’s why: in general, the IRS has three years from the time of filing to assess additional taxes. If you’ve substantially underreported income (omission of over 25 percent of gross income), the IRS has six years to audit your returns.

It’s a good idea to keep pay stubs until year-end to compare with the amounts shown on the W-2 form from your employer. Other records, such as last year’s tax and bank records, can be stored in an inactive area. Keep canceled checks for as long as you might need proof that payment was made. Canceled checks that support income tax deductions should be held as long as the returns themselves.

KEEP A LIST

Finally, CPAs suggest that you keep a list of all items and where they are stored. Maintain a copy of the list at home as well and give one to a friend or relative who can locate the items in an emergency.

ABOUT TSCPA

TSCPA (http://www.tscpa.org) is a nonprofit, voluntary, professional organization representing Texas CPAs. The society has 20 local chapters statewide and has 27,000 members, one of the largest in-state memberships of any state CPA society in the United States. TSCPA is committed to serving the public interest with programs that advance the highest standards of ethics and practice within the CPA profession.