Presented by Paystrubmakr.com By John Wolf and Tom Cullen CPA
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As your financial life gets confusing, it is hard to know, to what extent you need to keep records/documents and when it is safe to get rid of them. You may need to hold on to some documents for your whole life and others for just a few months.
There are a lot of reasons it can be important to hold onto pay stubs. For instance, pay stubs can be a handy reference when you need a proof of income letter for an apartment rental. In addition, you can use your pay stubs to calculate W2 wages when filing income taxes. While it’s always essential to have thorough financial records, it’s also important that you get rid of documents that you no longer need.
How long should you keep your documents?
1. Storing Financial records and Tax returns permanently
Your tax returns are important documents that need to be stored for future reference as a part of your financial history. You may be required to keep a permanent hard copy of each year’s tax return and any payments you make to the government, though 7 years should be the minimum time to keep them – that’s when the statute of limitations on income tax issues expires. Additionally, it’s a great idea to hold onto records of major financial events such as legal filings or inheritances.
2. Store Tax Documentation
Depending on your filing circumstances, the IRS may approach you for supporting documents for 3-7 years after you file a return. Realizing that, a great guideline would be to save the documents that support information on your tax return – including W2s and 1099s, bank and brokerage statements, payments and charitable donation receipts, etc. for about 7 years.
Keep your paystubs archived
3. Using Digital Records
With the advent of technology, it has become easier to store paycheck stubs effectively. You should either keep a digital or hard copy of the past year’s worth of your monthly bank and credit card statements. You should also hold on to your pay stubs to identify the accuracy of your Form W-2 wage when tax season arrives.
Affordable cloud-based storage allows users to store a large amount of information. This way you can store data effectively without making your computer run slowly. You can even hold on to your potential pay stubs forever with Dropbox or Google Drive.
4. Knowing your Essential Documents
While digital storage makes it easy to hold on to financial documents for a longer duration, there’s also a need to delete files at some point. This is when it can be helpful to know which financial documents you actually need to keep forever.
The list includes:
- Mortgage records
- Tax returns
- Receipts of major purchases and debt repayments
- Deeds and titles
Apart from these documents, there is a safe point in time when you can part with most other financial records.
5. Safeguard your Information
For physical documents, designate a safe, outside your home to store all paper records that protect them from damage or theft. For digital records, you need to be sure to archive and backup all of them in the cloud, not just on your computers at your home or business. It’s always a great idea for these records to be password protected.
Use complex passwords and change them often to keep your account information safe. Ensure that your username and password combination is different.
How to determine how long to keep pay stubs?
While paycheck stubs are vital as evidence of payment, they are not one of the financial records you need to hold onto forever. When in doubt, it is a good idea to hold on to a pay stub for at least one year. You will need your paycheck stubs each year while you prepare your income taxes. They are essential for reconciling your W-2 form and Social Security Contributions and by keeping your pay stubs, you will be able to ensure that you’re paying the right amount in taxes.
How to discard your paycheck documents safely?
When you are ready to get rid of your pay stubs, it was always necessary to discard them properly as someone can get a hold of your personal financial information. The best way to discard a pay stub or any important financial document is to shred it. If you don’t own a paper shredder, you can always look for a shredding service that will shred documents for you.
If you need more information on how to make a check stub? Visit http://paystubmakr.com/.
2021 is the cloud era. We can safely keep copies of any document on the Internet. Scanning became so easy by using smartphones and some cloud service or our own email account if we have very small businesses or employees.
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Disclaimer: John Wolf and paystubmakr.com are making a total effort to offer accurate, competent, ethical HR management, employer, and workplace advice. We do not use the words of an attorney, and the content on the site is not given as legal advice. The website has readers from all US states, which all have different laws on these topics. The reader should look for legal advice before taking any action. The information presented on this website is offered as a general guide only.