wAug 26, 2008

Question for the audience

Okay, so on the road to getting my life in order includes sorting out financial things. Today, I bought a book for $1 called Get a Financial Life by Beth Kobliner. It explains things so nicely! Things that I once had only a vague idea about are much more clear to me now.

The first thing I have to do is to get organized.

This book recommends keeping bank statements for three years, in case a person were to get audited (I might switch to receiving these via e-mail if possible, though; I'm all about not wasting paper).

It doesn't say anything, though, about how long to keep pay stubs. I'm sure it's okay to throw away my old pay stubs from ShopKo (I haven't worked there for nearly a year, and even then, I think I only worked a total of 5 days in 2007), but I really have no idea how long I should hold on to pay stubs from my current job. The only book advises only that I keep them, but surely not forever...?

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scribbled mystickeeper at 11:16 PM

I wouldn't keep pay stubs past a couple months, really. I can't imagine you'd need anything more than W2s, 1099s, etc. to document year-end income information in the case of something like an audit.

By the way, audits are incredibly rare. Look into it.

Fact is, nobody will care what a person earned for three weeks in July two years ago, just a total of all income earned and documented from all sources.

I'm not an expert but I do get to look at this crap ALL DAY.

By Blogger pickett, at 9:09 PM, August 27, 2008  

Because I'm anal about these things, I keep my paystubs for the same time period as my corresponding W2s, tax returns, etc. That way can you compare the stubs to your W2s in case there's a discrepancy. Employers' systems aren't foolproof, so I figure it's better to keep good records in case of a problem. And when it comes down to it, the stubs really don't take up that much room.

Also, the IRS can audit you up to six years from when you file the return if you fail to report 25% or more of your gross income. Probably not an issue, but just something to be aware of. And on the forever question...they can come after you at any time in the future if you fail to file a return or if you file a fraudulent return. But I'm hoping you're not committing tax fraud...

And yes, audits are very rare. But notices are not so rare. The IRS might send you a nice little letter asking for more information about your return, without actually launching a full-fledged audit. So keeping good documentation can save headaches later. And now I get off my soapbox.

By Blogger Jenny, at 6:54 PM, August 28, 2008  

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