(MoneyWatch) Even in this age of online banking and electronic bills, most folks still collect and save a lot of paper statements, receipts, and records. Now that this year's tax season is behind us, it's the ideal time to do some financial spring cleaning. But what can you toss?
You can immediately discard most receipts. That includes ATM receipts for cash withdrawals, but only once you've recorded the transaction in your checkbook. Also get rid of bank deposit slips -- after the funds appear on your bank statement.
Before I go any further, if throwing out any of your financial papers makes you nervous, you might consider a desktop or portable receipt scanner to create and save such documents in electronic form. One of my readers pointed out that you can also scan and save all of the records you want to retain online using a service like AboutOne.com. They allow you to organize, store, and retrieve your records from their secure website.
You can also discard your monthly credit card statements after you've checked the bill to ensure there are no incorrect charges or fees, and dispose off utility, phone, and cable bills after making sure they're accurate and paid up. If you ever need to know what you spent on these items for the past year, in most cases you can call the provider and ask them to run a report for the required date range. If you want the ability to run detailed reports on household expenses yourself, you can use a money management program such as Intuit's Quicken.
Bank account statements that are more than a year old also can be tossed. But keep the pages that include copies of checks, since most banks no longer return your cancelled checks. Paychecks can be tossed if they are over a year old and you've reconciled them with any your W-2 form and 401(k) plan contributions.
Read my post on IRS "period of limitations" for their review of most past tax returns is about three years. That means you can get rid of your 2007 tax return in 2012.
Of course, there are some tax records that should be retained. Here are two rules. First, keep records of the cost of any asset that can be sold or transferred for the entire time you hold it. This is referred to as the "life-of-the-asset" holding period. Second, if there is the possibility that you may have under-reported income by 25 percent or more, keep those tax returns for six years.
Finally, when discarding old financial papers, the safest way is to shred them using a cross-cut shredder. That will keep your personal information out of the grasp of dumpster-diving identity thieves.