Shred or Store: The Decision That Keeps Money in Your Pockets


Here’s the last Money Monday for the year 2023. Writing almost 52 Money Monday’s each year for the last four years have been both fun and a challenge. I hope you have learned something that has helped transform your financial life and made you a better steward. That said, I want to thank you for letting me into your financial life and I am appreciative of your comments and suggestions.

As we close out the year, that time when office cleaning takes place and old files, records and papers get tossed out, but before you toss, here’s a few things to remember regarding literal record-keeping.

Tax Records

Of all the records you might be tempted to throw away, these should be the last ones to go. At the very least, tax records should be kept for a minimum of three years. First the Internal Revenue Service (IRS) has three years from when you file the tax return to audit you for that particular year. Notice I said three years from when you filed the return and not three years from when the tax return was due! For example, if you are only now getting around to filing your taxes for 2020, (which were due in April of 2021) then the IRS has three years from now to audit those 2020 tax returns. So don’t throw those files away. Additionally, if you made errors, or overlooked an important or substantial deduction, you have three years from when the return was filed to amend your return. As a final note on this topic, if you file false returns, the IRS can go back more than six year to examine your returns. Generally, the agency may ask for six years of un-filed returns, but with fraud cases, the six year period does not apply.

Real Estate Records

I am always amazed how much money people may pay in taxes simply because they fail to keep records of improvements when it comes to their primary residence. Avoid this by always retaining copies of the sales and related transactions for at least three years after the sale of your property.

When it come to home improvements of your primary residence, you should retain those records commencing with the Settlement Sheet until you sell your house. Without getting into all the tax and legal jargon of cost basis, adjusted basis, depreciable basis and all those concepts, let’s just keep it simple. What you need to know is that when you purchased your house that was the initial basis. Whenever you make substantial improvements, additions or renovations to your home, that added to your basis. So, you should keep those receipts because when you decide to sell, you’re going to factor in these improvements. The higher your property value, less your higher basis (Cost + Improvements in this case) would result in less potential gains for you, and thus elimination, or reduction of, any potential taxes on your profit. This means less tax exposure when you sell your property. So the idea of throwing out your old house improvement receipts is pure financial insanity!

Individual Retirement Accounts and 401(k):

There are twists and turns on this one so follow me. Retain your records for three years after you have depleted these accounts if you have made non-taxable contributions or taxable contributions. If when you file your taxes you completed IRS Form 8606 for non deductible IRA contributions, then you have to hold on to those documents until you have depleted the account. Additionally, you should hold on to IRS Form 5498 when it comes to IRA payouts. If you don’t follow all that; just hold on to your IRS and 401(k) documents.

I look forward to more engagement in the year 2024, and want to challenge each of you to establish a goal and have someone hold you accountable! It’s time to start planning to pay off that car note; get rid of those credit cards, budget for that vacation; pour more into your retirement; start that business or simply plan to give more in 2024! Happy holidays and see you again on January 8, 2024.


Today’s What’s Up is about Roth accounts. Advisors are telling their clients that one of the most effective ways to reduce taxes in retirement is to establish a Roth IRA. Roth IRA’s are usually funded with after-tax dollars. I think their advice is very individualized because if you expect to be in a lower tax bracket later in life why not do a traditional IRA. However, Roth seems to be trending these days. Food for thought! And that’s what’s up!

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