Tag: small-business

To Keep or Shred? A Guide to Financial Record Keeping

Between physical filing cabinets and sprawling digital downloads, managing financial paperwork can quickly become overwhelming. Holding onto every piece of paper creates unnecessary clutter, while tossing the wrong document can lead to headaches at tax time—or worse, identity theft if improperly discarded.

Knowing what to keep, what to digitize, and what to run through the shredder keeps your financial life secure and organized.

Shred Immediately

  • Pre-approved credit card offers and loan solicitations: Primary targets for identity thieves if left in the trash.
  • Routine ATM slips and deposit receipts: Shred as soon as you verify the transaction on your online bank statement.
  • Monthly utility and sales receipts: Toss after verifying payment, unless you need the receipt for a product warranty, insurance, or a home-office tax deduction.

Hold for Up to 1 Year

  • Pay stubs: Hold until you receive your annual W-2 to verify that earnings and withholdings match.
  • Monthly bank and credit card statements: Keep for up to a year to review annual spending patterns, unless they contain transactions needed for tax deductions.
  • Current insurance policies: Retain current declarations pages; shred expired policies once new coverage is active.

The 3-to-7 Year Rule (Tax Records)

  • Supporting tax documentation (3 Years): The IRS standard period of limitations for an audit is generally three years from the date you filed. Keep 1099s, W-2s, medical bills, and charitable donation receipts for at least this timeframe.
  • Tax returns and complex filings (7 Years): To be safe, retain supporting tax files for seven years. The IRS audit window extends to six years if income is underreported by more than 25%, and seven years for claims on bad debts or worthless securities.

Keep Forever (or Life of the Asset)

  • Filed tax returns (Form 1040): Keep actual tax returns permanently—either as PDFs or physical copies—for personal reference and Social Security verification.
  • Property records & capital improvements: Retain home closing documents, title deeds, and major renovation receipts until at least seven years after you sell the property to substantiate your tax cost basis.
  • Roth IRA & non-deductible IRA records: Keep Form 8606 and contribution records indefinitely to prove tax-free basis upon future withdrawals.
  • Vital personal documents: Birth/death certificates, marriage licenses, military discharge papers, estate planning documents (wills, trusts, powers of attorney), and Social Security cards should remain locked in a fireproof safe.

Going Digital Safely

When clearing out physical files, scanning documents to a secure, encrypted cloud storage service or encrypted hard drive is an effective way to stay organized. However, always use a cross-cut shredder for any physical paper containing account numbers, Social Security numbers, or personal identifying information.

Please comment or send an email if you have any questions.

Joe Baker, CFP®

Baker Asset Management, LLC

joebaker@bakerassetmanagement.com

An Economic Storm is Coming for the US

In my last post, I talked about how our tariffs could adversely affect the 33+ million small businesses in the U.S. Today, I want to continue that discussion but go into a little more detail with some interesting illustrations that show the contribution that our small businesses have to our economy.

Tariffs have been used throughout history to protect domestic industries. When implemented tactically on certain materials or products within a broader, strategic economic plan, they have had some success. However, when you carpet-bomb everything simultaneously that is imported into our country with tariffs without letting our companies prepare and plan, it results in chaos, as we have seen already.

When our government implements very high tariffs suddenly, they impact many businesses, particularly small businesses, because the tariff must be paid by the business when the imported goods arrive in the US. Small businesses that have relied on a stable US system for decades need to adjust quickly and may not have the working capital to pay tariffs. Ships might remain offshore, orders could be canceled, and many small businesses may face bankruptcy.

There have been some exceptions for large businesses, but they are the companies that need them the least. These massive corporations have the flexibility and the resources to handle unforeseen expenses. Not giving the same breaks to small businesses does not make any sense. Just look at these charts below to see why:

This shows that 85% of the capital expenditures, basically the money that businesses reinvest into themselves to expand and grow, in the US economy comes from small businesses. These guys should be getting the tariff exemptions.

Here we see that small businesses (less than 500 employees) account for 110 million workers of the labor force, approximately 75% of the total number of workers employed in the country. Damage to this large of a swath of the economy would be devastating.

So now, the challenges for small companies have become a big problem for the US economy. Even if tariffs get knocked down substantially from their current high levels, many small businesses will not be able to absorb the costs and will have to pass the costs onto their customers, reduce their payroll, or worse, shut down.

Let’s hope we abandon the blanket tariff policy and instead develop a long-term plan along with our trading partners that will benefit all parties.

Please comment or send an email if you have any questions.

Joe Baker, CFP®

Baker Asset Management, LLC

joebaker@bakerassetmanagement.com