By Jeff Yoakum

It is that time of year again – time to control the piles of paper and documents as you prepare your taxes. You may want to take this time to organize your financial records. Most people spend more time organizing their iTouch or BlackBerrys than their financial records.

With identity theft increasing, it is important to keep your personal financial information secure. Are your financial and legal documents in a safe and accessible place? Let’s review some guidelines on what you need to keep and what can be shredded.

• Tax returns: The IRS has three years to challenge information in your return and six years to conduct an audit based on unreported income. It is a good rule to maintain your tax returns and supporting records, such as W-2s and 1099s from financial institutions, for at least seven years. Remember, there is no statute of limitations on audits if the IRS believes a return was fraudulent.

• Bank statements with canceled checks: These should be kept for the seven-year period if they corroborate information on your tax returns. Shred other bank data after reviewing for errors.

• Investment statements for taxable accounts: Mutual fund companies and most brokerage firms send annual statements summarizing the year’s transactions. Once you receive these, shred monthly or quarterly statements. Keep records of prices and commissions paid for stocks and mutual funds. This information is vital to determine how much you owe in taxes when you sell. Keep trade confirmations up to seven years after you file a tax return showing a gain or loss from selling an investment.

• Retirement plan contribution records: These should be kept indefinitely for all nondeductible individual retirement accounts, such as a Roth IRA. You may need these documents to prove you paid taxes on the contributions. Without them, you may pay taxes again when the money is withdrawn. Some financial institutions keep records of IRA contributions, but don’t take the chance without checking.

• Credit card statements, especially for large purchases such as jewelry or appliances, are needed to file an insurance or warranty claim. If you put charitable contributions on your credit card, keep the statement with your insurance or warranty records.

• Living trusts, wills, insurance policies and other legal documents: Keep these indefinitely. Many people store their wills in a safe-deposit box, but that creates problems for your executor if you die unexpectedly. Your safe-deposit box may be sealed until your executor or heirs can prove they are authorized to open it. You can avoid that problem by putting someone else’s name on the safe-deposit box, such as your spouse or a trusted relative. Or you may want to store the documents in a safe and accessible place, such as a fireproof box in your home. However, leave instructions with heirs imparting the key’s location or access code.

• Go green as much as you can by storing documents electronically on your home computer and use a scanner to retain this information. You can find information quicker, and you’re less likely to misplace important documents.

Many financial institutions will provide electronic statements and records. Make sure to back up everything – a hard-drive crash could wipe out your entire financial history in seconds.

Transfer your records to a CD and store it in a safe place. You might want to consider online backups.

You can conquer the mounds of paper if you understand what you need to keep and what you can safely shred. You and your family will be pleased by the time saved by organizing.

Jeffrey F. Yoakum, CFP, is executive vice president of Lasecke Weil Wealth Advisory Group LLC, in Palo Alto. For more information, visit www.laseckeweil.com, call 323-3700, ext. 307, or e-mail jeff@laseckweweil.com.