4 Ways to Declutter Your Finances for Tax Season

If you dread tax season, there are a few things you can do to make filing taxes easier. Here’s what to shred, what to file and what to save..

1. Shred bank statements.

If you still get paper bank and credit card statements, shred them (along with receipts and bills) annually after you’ve filed your taxes, says Andrew O. Smith, author of Financial Literacy for Millennials. Most financial statements are easily retrieved online for at least five years. When it comes to shredding the statements, choose a shredder that can handle multiple sheets and staples and paper clips to cut down on the time it takes to empty that folder to make room for the next year’s forms.

2. Save and scan these important documents.

Of course, you can’t shred all of your files, as you’ll need to refer to some important documents year after year. Keep hard copies of vehicle titles, real estate or property records and insurance policies for as long as you own them. What to keep indefinitely: birth, marriage and death certificates; Social Security cards; health care proxies; and wills. Store hard copies in a safe-deposit box or fireproof safe. And make sure you have a digital backup: it’s always a good idea to scan and save your most important files.

3. Go paperless the safe way. 

Protect access to online financial accounts with a password you change every three months. Apps such as Dashlane or LastPass help you do that. Keep a record of passwords in a safe place so your accounts can be accessed in an emergency, says certified financial planner Nancy Coutu, co-founder of Money Managers Financial Group in Oak Brook, Illinois. Consider setting up a separate email address for statements and bills, and review them monthly so you can spot fraud ASAP.

4. Know how long to keep tax returns.

Stick with the seven-year rule even though your audit risk lasts only three years from the date you file. What qualifies as a tax record? Anything that’s evidence of income, (W-2s, 1099s), deductible expenses or a tax credit (papers proving tuition or child care payments or retirement-plan contributions). Also, keep health insurance records.