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Taxes done? What to keep and what to toss

As I'm sure you've heard Bostonians do not need to file taxes until Tuesday, April 17. While taxes are typically due on April 15, that date falls on a Sunday. Obviously, Monday would be the next logical choice. But this year Monday, April 16 is a Massachusetts state holiday, Patriots' Day. Or in other circles, Marathon Monday. (Since 1969, we've had three-day weekends during April's third week.) Monday, April 16, also happens to Emancipation Day, a holiday in Washington, D.C., and our IRS offices are also closed on Monday.

But, starting on Wednesday, April 18, feel free to get out the shredder. Carefully. Celebrate and spring clean. But do it wisely. How do you figure out which documents are necessary to keep and which ones are absolutely outdated and frivolous? Start by shredding everything over seven years old. Then attack any document that has "THIS IS NOT A BILL" stamped in red on the front. We often see those with our estimated property tax assessment information once or twice a year. You can get rid of tax notices, but not tax records.

You must hang onto your stock trading confirmations, investment costs and transferred securities. But you only need one statement that shows the entire year's transactions. Go ahead and toss your monthly reports.

If you wish, go ahead and keep a copy of all your perpetual tax returns (especially if you bought or sold property that year) but go ahead and throw all the receipts and W2's if the file is more than seven years old. (Support documents must only be kept for three years after the return was due, but the IRS has six years to challenge returns, so seven years is just a safe hedge.)

Hang onto forms relating to any home improvements. They may come in handy when you go to sell the property. Also file any receipts related to tax-deductible expenses if you have your own business or work out of your home. If you are divorced with minor children and can claim the children on your tax return, keep any records pertaining to your children's expenses.

In general, once you've verified credit card statements, toss all those receipts. And get rid of old pay stubs and cancelled checks. Really, it'll be okay.

Source: The Wall Street Journal, "Done with taxes? Tame the paperwork monster," Chuck Jaffe, April 11, 2012

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