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What Records Do I Need to Keep?

What Records Do I Need to Keep?

| February 01, 2019
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It’s a snowy day in February and you’re ready to clean out your files. What should you keep and what to throw out? Do you really need the bank statements from 10 years ago? Is it really necessary to keep the retirement plan statements from each quarter?

Let me give you two general guidelines:

1. Keep financial records that may have meaningful information for nostalgic reasons or legally contested matters. But never keep records just to keep them. 

2. Save any records necessary for tax purposes. The IRS has a statute of limitations for three years from the date of filing. For example, your 2012 federal income tax return cannot be audited after April 15, 2016.

An exception is if the IRS finds in an audit that you understated your income by at least 25%, then they can go back six years and audit. If you have not filed a return, then no statute of limitations applies. This means the IRS could assess tax for any unfiled year.

Here is my recommendation for what records you should keep and how long should keep them (and it leans on the conservative side compared to other online lists):

  • Bank statements: 4 years
  • Charitable contribution receipts: 7 years (only if you itemized for taxes)
  • Real estate deeds and purchase documents: permanently (while owned)
  • Income tax returns: permanently
  • Supporting documentation for income tax returns: 7 years
  • W-2s, 1099s: 4 years
  • Investments
  • Annual reports and prospectuses: read and dispose
  • 401k, IRAs quarterly or annual statements: until next statement arrives
  • Insurance policies: permanently (while in force)
  • Mortgages and loan documents: permanently (while outstanding)
  • Utility bills: dispose of, unless supporting a tax deduction
  • Social Security earnings estimate benefit statements: 1 year

Finally, as you purge your records, use shredding or other disposal methods to protect your identity. Also, remember to back up all electronic records and keep the back-up copy at another location. Your back-up does not help you if it’s stored in the drawer next to your computer and your house burns down.

Jeremy L. White

 

 

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