Maintaining a well-organized collection of essential documents is crucial for safeguarding financial security. These papers provide proof of transactions and play a vital role in managing personal affairs for the future.
Properly keeping these records makes you ready for any financial situation.
Tax Returns
Keep copies of your federal tax returns and all supporting documents for at least three years. In 2023, the IRS reported that $271.4 million tax returns were filed in America.
Retaining tax records is crucial for verifying income, and deductions, and potentially resolving audits. Maintaining these documents can also help if you need to file amended returns or provide proof of income.
1099 Forms
1099 forms are important financial documents as they help report income from freelance work, investments, and other sources. In 2023, the IRS issued over 2 billion 1099 forms to self-employed individuals and those with additional sources of income. Retaining 1099s is essential for property filing taxes.
These forms can also be used to track business expenses and income for tax deductions.
W-2 Forms
Store your W-2 forms from employers to verify income and report to the IRS. This form is required to be filled if you receive a minimum of $600 from your employer. Keeping W-2 forms helps ensure accurate tax reporting and can aid in tracking employment history.
These forms are essential if you need to provide proof of income for loans, rental applications, or government assistance.
Bank Statements
Retain bank statements for at least one year for account management and tax purposes. The average American holds 5.3 different bank accounts, making it important to maintain these records. Bank statements can help you reconcile transactions, monitor for fraudulent activities, and provide documentation for tax filing.
Social Security Statements
It is crucial to keep your Social Security earnings statements for reference and verification. Around 67 million Americans receive Social Security benefits, making these statements a vital financial document. These statements can help you track your earnings history and ensure you receive the correct benefits when you retire.
Mortgage Documents
Mortgage documents, including loan agreements and payment history fall under important financial documents. The average American mortgage balance is $244,498, underscoring the importance of maintaining these records. Mortgage documents can help you verify interest paid for tax deductions. It can help you track your home equity for future financial planning.
Investment Statements
Keep your investment statements for stocks, bonds, mutual funds, or retirement accounts safe. In the U.S., 61% of individuals have stocks. Preserving investment records is crucial for tracking performance and tax reporting. These statements can also be used to monitor the growth of your portfolio and make informed financial decisions.
Pay Stubs
It is important to keep your recent pay stubs. It helps in verifying income and for tax reporting. The median household income in the U.S. is $78,171, underscoring the importance of preserving these earning documents. Pay stubs can also be used to track deductions, benefits, and other employment-related information.
Income Statement
Preserve your company’s income statements, also known as profit and loss statements. Many small businesses consider bookkeeping as one of the most complex parts of owning a business. Income statements summarize revenues, costs, and expenses over a specific period. These documents are essential for assessing profitability, planning future strategies, and preparing accurate tax returns.
