The WAHM Connection

Organizing family papers, continued below...

FAMILY RECORDS: What to Keep Where and For How Long?

by Debra Pankow, Family Economics Specialist

Health, accident and auto insurance information, and information on allergies, health problems and blood type should also be carried with you.

Other records require a different approach, but the approach does not need to be difficult. Use NDSU Extension Service circular HE 446, "Inventory of Important Family Records," as a guide for what type of records to keep, and then as a record of where these records can be found.

The easiest way to keep track of your family papers and business records is to set up a filing system. A place to store file folders is more important than a fancy desk. A metal filing cabinet, an under-bed storage chest or cardboard box, or an accordion folder will do the job as well as a desk drawer.

Gather your important papers from throughout the house. Divide your file folders into three major areas:

1.Current financial records
2.Inactive financial records
3. Permanent records

The current files should include employment records, credit card information, insurance policies, family health records, warranties and guarantees, education records, bank statements, a household inventory, tax records and canceled checks. These headings may be used as a basis for your filing system.

The inactive files are used to store the items from the current files that are three years old. Go through the current files once a year. Discard unneeded items and transfer others to inactive storage. A good time to make transfers is the first of the year, when you work on your income tax forms. File headings would be the same as for current files.

Permanent records are Very Important Papers, ones which should be kept safe -- in a safe deposit box or in a fireproof (and waterproof) storage container.

Every family's file folder labels will be different. Divide each area into categories that make sense to you. Circular EC-510, "A Farm and Home Filing System for North Dakota Farm Families," may help you get organized. Feel free to add to or change your file labels to better meet your family's changing needs.

A good record keeping system will allow someone who is unfamiliar with the system to locate important documents, maintain records and prepare reports in case of an emergency.

What Are Very Important Paper (VIPs)?

Very Important Papers include:

Papers or records that prove ownership (such as real estate deeds, automobile titles and stock and bond certificates)
Birth, marriage and death certificates
Legal papers (such as divorce and property settlement papers)
Contracts
Household inventory
Wills
Advance Directives such as Living Wills or Durable Powers of Attorney for Health Care
Anything else that would be expensive or difficult to replace.

Where Should VIPs Be Stored?

A safe deposit box in a financial institution or a home fireproof safe is the best place for your family's VlPs. Papers that cannot be replaced or would be costly or troublesome to replace belong in this type of storage. In general, bank account registers, canceled checks, transcripts, medical histories, employment records, tax returns and insurance policies do not need to be kept in a safe deposit box or fireproof home storage.

How Long Should One Keep Tax Records?

The Internal Revenue Service (IRS) has a three year statute of limitations on auditing a return. Keep all records of income or deduction expense for three years. However, if you use the income averaging option, you may need to prove your taxable income for four base years and if you failed to report more than 25 percent of your gross income, the government will have six years to collect the tax or start legal proceedings. Filing a fraudulent return or failing to file a return eliminates any statute of limitations for an audit by the IRS. If you hire a tax specialist, check to see how many years you should keep your records.

Keep records that show the original cost or value of your property. Also keep a record of home improvement costs to reduce capital gains tax if your home, land or property is ever sold for more than its original cost or value.

All canceled checks are not needed to support tax deductions. Save only those checks that substantiate aincome tax deduction, such as checks paying for medical/dental expenses or charitable contributions. Putting a "T" for "tax" in the memo blank of a check when you write it might help you sort canceled checks faster. In cases where your only record is a duplicate check, you may need the monthly checking account statement to verify that the check went through.

Keep a copy of filed tax returns. Should you need it, a prior tax return copy can be obtained from the IRS center where you filed your return. Complete form 4506, Request for a Copy of Your Tax Form, and pay the fee ($23.00 in 1998). From North Dakota, mail the request to the IRS, Photocopy Unit, PO Box 9941, Ogden, UT 84409. If you have moved to North Dakota, request the copy from the IRS center in which you filed the return you want copied. IRS center addresses are listed in most IRS publications.

What To Keep Where and For How Long?

Records are kept in four places: in a home filing system; in a safe deposit box or fireproof home storage; in the wallets and billfolds of household members; and in each vehicle owned (refer to the Guide for Family Records).

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