Taxation & Estate Planning

How Long Should you be keeping Financial Documents

By Deirdre R. Wheatley-Liss, Esq.

I met with a client yesterday to go through decades of files to answer the question of "what papers do I still need to keep?" This seems to come up often around tax time, so much so that the question was posted on Yahoo Answers today. Yahoo's answers with my comments are below:

Dear Yahoo!:
How long should you keep personal financial records like bank statements, receipts, tax statements, etc.?

Our first stop was a web page from Bankrate.com with the perfect title: "What financial records to keep and how long to keep them." The information is laid out in an easy-to-read table format. Here's a quick overview -- for details, check out the web page.

Taxes -- Seven years. The IRS has three years from your filing date to audit your return if it suspects good faith errors, and six years if it thinks you underreported your gross income by 25 percent or more. DWL adds - Keep your returns and all the supporting information (W-2, 1099, etc.) that you relied on to fill out the return.

IRA contributions -- Permanently. DWL adds - To "keep" does not mean you need paper files - an annual scanning program, with a copy back-up'ed elsewhere, is encouraged.

Retirement/Savings plan statements -- From one year to permanently. Keep the quarterly statements until you receive your annual summary; keep the annual summaries until you retire or close the account. DWL adds - Make sure the summaries are correct before you toss the interim. And remember that scanning is your friend.

Bank records -- From one year to permanently. Throw away checks that have no long-term importance, but keep checks related to your taxes, business expenses, and housing and mortgage payments. DWL adds - If you can get on-line statements and save electronically, you can back those up separately and rid yourself of the statements and checks.

Brokerage statements -- Until you sell your securities. DWL adds - If you can get on-line statements and save electronically, you can back those up separately and rid yourself of the statements and checks.

Bills -- From one year to permanently. In most cases, when you receive the canceled check, the bill can be tossed. However, you should keep bills for big purchases (e.g., jewelry, appliances, cars, collectibles, etc.) for proof of their value in the event of loss or damage. DWL adds - Again, to "keep" does not mean you need paper files - an annual scanning program, with a copy back-up'ed elsewhere, is encouraged.

Credit card receipts and statements -- From 45 days to seven years. Keep the statements seven years if they document tax-related expenses. DWL adds - Again, if you can get on-line statements and save electronically, you can back those up separately and rid yourself of the statements and checks.

Paycheck stubs -- One year. If your W-2 form matches your stubs, you can toss your stubs.

House/Condominium records and receipts -- From six years to permanently. DWL adds - Again, to "keep" does not mean you need paper files - an annual scanning program, with a copy back-up'ed elsewhere, is encouraged.

We found a couple of other helpful articles in the search results -- one from Kiplinger.com and another from BlueSuitMom.com. Kiplinger.com suggests you keep your tax returns forever, while the blue-clad mother says it's a good idea to routinely purge and file your receipts on a monthly or quarterly basis.

All the sites offer the same piece of advice -- whether you use a filing cabinet, shoebox, or desk drawer, find a system that works for you and stick with it.

Full post as published by New Jersey Estate & Elder Planning Blog on January 15, 2008 (boomark / email).