Which papers you need to keep, which ones to toss

Your Funds

To me, it seemed like the stack of papers on the shelf just outside my office had been there for maybe a year.

When I finally dived into it this week, I was shocked to see that I could have reconstructed the majority of my financial life from 2012 through 2013. There were bills and bank statements, some check stubs and more.

Aside from being part of an unsightly pile, the other thing all of the paperwork had in common was that it was all trash.

While I normally do a spring cleaning of paperwork each year when I file away my tax return, this was proof that I hadn’t handled my business. The good news was that the unsightly pile of paperwork was gone in a few minutes.

It would be better news if you used that story as impetus to get rid of most of the financial clutter in your house.

These days, spring cleaning your finances includes shredding documents and deleting computer files.

Here’s a guide on what to keep, and what can go:

• Tax records

Unless you’re filing fraudulent returns — for which there is no statute of limitations — you can reduce income-tax returns into several stacks of paperwork

Old tax returns — especially those covering the purchase or sale of property — can be important for compiling future returns, possibly decades into the future. Thus, keeping the return documents in perpetuity is prudent, though not necessary when returns are decades old and several residences in the past; most tax preparers keep copies of your documents for the life of your advisory relationship, so you may have backup there too. (If you have access to the electronic copies, you can discard the paper versions.)

“Support documents” — the receipts, bills and tax forms on which you based your tax math — must be kept for three years after a return is due. Thus, you can now toss all of the receipts that predate 2013 (that return was filed in 2014, and the three-year period after the return was due expired on April 15).

If you have multiple sources of income and want to stay ultracautious, keep forms related to income (like 1099s and W-2 forms) for six years, the time the IRS has to challenge returns on which it believes gross income was underreported by 25 percent or more.

• Investment papers

Brokerage firms now provide cost information on stock purchases, mutual funds, options, bonds and other securities.

That’s a relatively recent development — the rules changed in 2011 for stocks and 2012 for mutual funds — so don’t be too quick to shred old trading confirmations.

Some financial-services firms didn’t have data on purchases made before the rule; you can work with a firm so that their accounting reflects the papers you saved — at which point the firm’s numbers can be considered reliable.

Until you know the records are correct and complete, keep your trade confirmations.

Do, however, shred investment papers you don’t need. Year-end statements show all transactions for the year, allowing you to discard all monthly/quarterly documents except that year-ender. Your files slim down fast when your annual activity is summarized.

• Pay stubs, bank statements, canceled checks and consumer bills/receipts

Your last paystub of the year is useful for cross-checking your employer’s tax reporting, getting the value of donations made through payroll deductions and, depending on circumstances, recording the amount of money you paid for health-care coverage; all the rest are insta-trash, provided you got what you are entitled to and there are no disputes with your employer.

Canceled checks today generally are mini images on a bank statement. You don’t need to keep records showing that you bought groceries or made a copay at the doctor’s office in 2014 or, worse, 1997. If we assume you clipped images with tax ramifications — charitable contributions, mortgage or tax payments, home improvements and the like — those are part of your support documentation. Once you clip those few images and balance your checkbook — or, more likely, just accept what the bank says about your account — shred the rest.

Old credit-card statements, utility bills, department-store and service-station charge card bills all get the shredder, with few exceptions. Anything showing tax-deductible expenses is treated like a support document. If you used a credit-card to pay for home-improvement expenses — which have tax implications — squirrel that record away for use when you sell the home someday.

• Passwords

Consider this spring maintenance rather than “spring cleaning,” but several surveys have shown that at least two-thirds of people never change passwords or use one password for all accounts.

You not only want to change passwords, but have strong ones. The same goes for security questions on your accounts; pick the questions wisely and make sure the answers are not readily available on your social-media accounts.

The same goes for your dog’s name, the high school you went to and more.