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How Long To Keep Your Financial Records?
By admin | September 5, 2011
With spring around the corner and tax season upon us, now is a great time to de-clutter some of your financial records. But, you may be asking yourself, “How long do I need to keep my financial records?” Good question and one that my clients ask me all the time. The short answer is, “it depends”. Basically you should keep your records in 4 categories: Short-term Records, Mid-term Records, Long-term Records, and Permanent Records. I’ll highlight some of the biggies in each category, but you can use the chart for a more detailed list when sorting through your financial records.
Short-term Records
Financial Planning
Review your bank, broker and other financial institutions year-end statements to make sure they accurately reflect the monthly statements. Then you can toss the monthly statements. Keep those year-end statements with your tax files. Toss your ATM receipts and bank-deposit slips as soon as you match them up with your monthly statement. Pitch your pay stubs as soon as you receive your W-2 for the year. You can also toss paper copies of your credit-card, utility, phone and cable bills as soon as the next month’s bill confirms your last payment arrived (unless you need to keep the bills for tax purposes, e.g. if you deduct home-office expenses, etc.). And when you do decide to toss any financial documents, be sure to shred them so your garbage doesn’t become pay dirt for identity thieves.
Mid-term Records
Keep receipts, warranties, and, instruction booklets for major appliances and electronics. You can get rid of this material when you no longer own the item. Keep vehicle purchase receipts, titles, and registration and maintenance and repair records for as long as you own the car, boat, truck, or other vehicle. Keep closing documents for mortgage, vehicle, student, and other loans until after the loan is paid off. It’s a good idea to keep difficult to replace documents such as, titles and mortgages in a safety deposit box.
Long-term Records
This category includes personal federal and state tax returns and their supporting records. The IRS could randomly audit you for up to three years after you filed the tax return. If you fail to report more than 25 percent of your gross income, the IRS has six years to collect the tax. However, you can be audited at any time if the IRS suspects fraud. Although it’s generally recommended that you keep your tax returns for at least seven years, I recommend to my clients that they hold on to them forever (or at least make a digital copy and store it in your safety deposit box.)
Permanently Records
Essential records such as birth and death certificates, marriage licenses, divorce decrees, Social Security cards, and military discharge papers should be kept in your safety deposit box. In addition, you should keep the following estate planning documents in your safety deposit box: wills, trusts, and powers of attorney, life insurance policies, and pension-plan documents. It’s also a good idea to keep a list of what you have in your safety deposit box. Update the list every tax season or as you add or remove documents. You might also want to keep photocopies at home of any documents you have in your safety deposit box, just in case you need to refer to them.
Record Keeping Summary
Short-term Records
Note: Keep year-end statements and other items needed to support your tax return.
Bank records
Credit-card bills
Current-year tax records
Insurance policies (auto and home)
Investment Statements
Pay stubs
Receipts
Mid-Term Records
Medical bills (in case of insurance disputes)
Vehicle records
Loan documents
Household furnishings paperwork
Long-Term Records
Supporting documents for tax returns
Stock and bond records
Insurance policies (keep for the life of the policy)
Accident reports and claims
Medical bills (if tax-related)
Property records/Improvement receipts
Wage garnishments
Other tax-related Bills
Permanent Records
Income tax returns
Legal records
Important correspondence
Retirement and pension records
Birth and death certificates
Life insurance policies
How Long To Keep Your Financial Records?
Anthony J. Baldassano, CPA/PFS is the owner of Anthony & Associates, CPAs, located in Barrington, IL. http://www.AccountantsBarringtonIL.com
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