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Having a proper records retention schedule can keep office and storage space organized and free from clutter. But how often should you clear the decks? Weekly? Monthly? Quarterly? No need — once a year is plenty. Fortunately, you’re given the perfect annual opportunity to purge business/household paperwork and start fresh with a new filing system — it’s called tax time! Here are some steps you can take during the yearly scrub, to keep your files from becoming overloaded with old and outdated records.

Purge Active Files

Your active files are only intended for the current year’s paperwork. So start with those files where you store monthly bills — utility/mortgage/lease/insurance payments, credit card and bank statements, medical expenses, and purchase receipts. Old data should be redistributed to make room for the new — sent either to archive storage, your permanent files, or the shredder (depending on what it is).

Gather Current Tax Records

Pull out any documents that relate to income, withholding, tax payments, charitable contributions, business expenses, and deductions — then make sure you have separate folders for storing each category of the coming year’s paperwork in the “tax” section of your active files.

Review Archived Tax Records

Generally speaking, you should hang onto supporting tax documents for 6 years in case of an audit — but ask your accountant if you face any special circumstances that would extend that to 10 years. Store your archived paperwork in hanging file pockets labeled with the year, contents, and destruction date. (Then when you add the new year’s tax records, the oldest can be shredded.)

Keep Permanent Files

You’re required to keep tax returns forever (there’s no statute of limitations on how far back the IRS can ask you to prove that you filed a return) — so make sure you have these stored together, separate from the supporting documents. A few other items should also be moved from active monthly folders to a permanent file — with hard-to-replace records placed in a fire safe or safe deposit box:

• receipts, warranties, and instruction manuals for major purchases
• investment statements and trade confirmations
• important correspondence and legal documents
• car and property records
• insurance policies
• income tax returns and payment checks
• vital records (birth/death/marriage/divorce/adoption)
• retirement and pension records
• CPA audit reports
• trust documents

Know What To Toss/Recycle

The rest of your “everyday” paperwork has a limited shelf life — there are only a few good reasons to keep a bill or receipt after a year’s time:

• you’re trying to clear up an error or dispute with your account
• you need to return an item that you have purchased
• you’re waiting for your insurance company to pay a claim

If a receipt doesn’t meet one of these criteria, why are you keeping it? Most bank and credit card companies place a time-limit on resolving disputes (usually 60 days) — so letting a problem linger in your files actually makes it harder to clear up later. If you’re keeping old statements because you “might need them someday,” remember that most of these records are now available electronically any time you want them. And if you still can’t convince yourself to toss them out, you can keep bank and credit card records archived for 3 years — but after that, they have to hit the road!