F21 It is important to remember that record-keeping systems are as unique and different as the person using them. There is no "ideal system" that will work for everyone. For most individuals, an essential ingredient and good way to begin is by setting up a checking account. If you already have a checking account, consider paying more than just monthly bills with it. Many consumers find that a canceled check serves as effective support in a dispute. Checks should be saved indefinitely for major purchases, disputed transactions, and legal matters.

Consumers should also retain checks that evidence tax-deductible expenditures at least six years after the date the return was filed (or due date if later). Some banks don't provide customers with canceled checks, but do keep other records to document the checks drawn against the account. In any case, a properly maintained checking account should record all your income and expenses.

When designing your recordkeeping system, always remember simplicity and consistency. Avoid a system that is too complicated to remember easily; you'll become unsure of where to file your documents. Also, don't let documents pile up over a period of time. Maintaining your records should become part of your routine so you can avoid searching for lost records in piles of old forms and receipts.

It is important that you find a central location for your records. They should be easy for you to reach so you're inclined to maintain and update them on a regular basis. Remember to prepare a index listing all important documents and their location.

Give this list to your next of kin, your attorney, CPA, or trustee, if any, or executor of your estate, and keep copies on file both with records and in a separate place.

Avoid storing records in a place where they can be stolen or damaged by natural elements. Your records should be placed in a fireproof unit, if possible. For documents that would be difficult to replace, consider a home safe. Some individuals choose to keep their vital records in a safe deposit box at a financial institution.

Next month we will discuss the types of records you need to be keeping.

-- CPA Client Tax Letter