Year-End Paperwork Purge: What to Keep, What to Shred

Shredding confidential materials
Shredding confidential materials

New Year's resolutions seem to follow a pattern year after year: Reduce clutter, tackle paperwork, organize finances, and get a jump on taxes. But even the most digitally savvy consumer can amass reams of paperwork by year's end, from ATM and gift receipts to credit card statements and tax forms. Here's the skinny on what to keep and what to toss.

What to Shred

No matter whether you keep or toss, the first step is always the same: "Before you start shredding receipts and statements, it is very important that you review them carefully so you know what fees you are paying and that the charges and transactions shown on the documents were actually made by you," advises Michelle Muth Person, a spokewoman for the Consumer Financial Protection Bureau.

Checks from a credit card company offering low annual percentage rates for balance transfers and other preapproved credit offers should be shredded upon receipt if you don't plan to use them. Once reconciled with corresponding accounts, ATM receipts, canceled checks, and pay stubs can all be shredded.

What to Keep

Hang on to monthly banking, brokerage account, and credit card statements. "Many people just make the payment and don't look at the fees and charges," Person says. "Compare the current statement to the previous statement. Verify that there were no mistakes or differences between last month's ending balance and this month's starting balance." Once you've reviewed the statements and addressed any inaccuracies, you can shred them when the year-end statement arrives.

Certain papers should be kept for life, including divorce and estate documents and annual retirement plan forms. Per IRS recommendation, keep filed tax returns that don't require additional payments for three years.

Go Digital

The best way to minimize year-end paperwork is to minimize paperwork in general. Whenever possible, opt out of credit card offers, request that banks not send blank checks if you don't plan to use them, and choose to receive forms digitally. Sign up for online banking when it's available to eliminate the need for physical checks (as well as envelopes and stamps), and opt to get digital alerts when bills have arrived and payments are due.

Tax returns can also be filed digitally on secure servers, and copies of the completed forms downloaded directly to a personal computer. Users can opt to have their Social Security number partially stricken from the download for additional security.

Protect Your Credit

Even the most paper-averse consumer is still susceptible to identity theft. Reviewing credit card statements monthly for anomalies can help detect early warning signs of possible fraud and credit theft. Year-end is also the perfect time to order a free credit report and monitor any suspicious activity, and dispute any incorrect claims.

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A Year-End Audit

While reviewing and shredding paperwork, take the opportunity to review your spending and evaluate the fees and APR on your credit cards. Review interest rates charged throughout the year to ensure they haven't changed without notice. (Check the Federal Reserve's website for help on how to read credit card statements.)

The CFPB has a website with a variety of resources for individuals, including a question-and-answer section on various financial products and services.

The IRS website has become much more user-friendly in the past few years, and provides answers to the most popular tax questions.

Prepare for Next Year

The best way to avoid year-end paperwork panic is to set systems in place that will eliminate unnecessary paperwork, dispose of received paperwork in secure ways, and organize finances so that reviewing them is an easy task. Keep only what's necessary and next year's year-end paper purge will be painless.

Motley Fool contributor Molly McCluskey writes about personal finance, investing and budget travel.