24 Tips to Get Organized in January: Tip #19, Buy a Shredder

Tip #19: Buy a Shredder

Long before we moved into our building, our neighbors found an interesting pile of boxes outside on the curb, put out for the trash. They were patients’ medical records from the prior tenant, a doctor who had moved on.

My guess is that the doctor did what most businesses did: he hoarded things that he could not bear to throw out until it completely overwhelmed him.

Why? Because, as a society, Americans in particular, hate to throw things out. And business owners are the worst. I think we hold onto things partly because we’re scared to throw them out but also partly because we don’t know how to throw them out.

Our solution at the office? A shredder. And not a small, one page at a time shredder. And not the “shred an entire car” variety. But somewhere in the middle.

You can buy a decent shredder for between $100-1000, depending on how high end you need to go. “Medium” sized shredders can usually cross shred 10-15 pages at a time, plus envelopes, staples and CDs.

It has been a lifesaver for our office. I receive lots of personal information at our office with respect to clients and worse, former clients. It’s nice to be able to let it go by shredding it instead of filing it away somewhere.

What do you need to save? Well, it varies from profession to profession with respect to client records. But with respect to your business and financial records, I suggest holding onto your tax returns for 3-7 years, depending on your circumstances. Supporting documents for those returns should last as long. But other financial records? That parking ticket from 2 years ago? Throw it out.

Absent fraud, failure to file or serious/gross understatements, the statute of limitations is 3 years after the latest of the filing date or the due date for most federal returns. That means that a properly filed return (again, absent fraud or serious/gross understatement) cannot be audited once the 3 year statute has run. After that time, you can dispose of the return and/or supporting documentation (though many of my clients will keep their returns permanently and simply destroy the supporting documentation). Supporting documentation also includes canceled checks, old bills and bank statements. Shred away!

There is no need to keep resumes and employment applications older than one year on hand. Chances are, the candidates’ positions have changed since that time anyway.

With respect to employment records, a good rule of thumb is to keep personnel files on hand for the term of employment plus four years. It may been shorter, depending on the circumstances, but it’s often better to err on the side of caution when it comes to employment-related matters.

Never throw out licenses and permits, incorporation documents (like Articles of Incorporation or minute books) or papers related to the purchase or sale of real estate that you retain an interest in (yes, you can throw out old agreements of sale for properties that you didn’t buy or property that you sold more than three years ago).

Of course, these are just rules of thumb for clearing away the clutter. It’s always best to consult with your tax professional or accountant before you take any action that you can’t reverse.

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