How Long Should I Keep Financial Records?

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While you were preparing for tax season, I’m sure you wadded through many files of financial paperwork wondering what you should keep and for how long. I get this question all the time ‘Christina, how long do I need to keep all of the stuff?’ Since this is fresh in your mind, I thought it would be a good time to share with you the document on ‘Record Retention’. Throw all the papers you don’t need into a box or a big paper bag and save it for a shredding day. With the warmer weather still a few weeks away, this is the perfect time to purge your files – it is a great feeling!

The following are suggestions about how long you should keep personal finance and investment records on file:

Financial records timeline

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Type of record Length of time to keep, and why:
Tax ReturnsCanceled checks/receipts (alimony, charitable contributions, mortgage interest and retirement plan contributions)

Records for tax deductions taken

Seven years

  • The IRS has three years from your filing date to audit your return if it suspects good-faith errors.
  • The three-year deadline also applies if you discover a mistake in your return and decide to file an amended return to claim a refund.
  • The IRS has six years to challenge your return if it thinks you underreported your gross income by 25 percent or more.
  • There is no time limit if you failed to file your return or filed a fraudulent return.
IRA contribution records Permanently
If you made a nondeductible contribution to an IRA, keep the records indefinitely to prove that you already paid tax on this money when the time comes to withdraw.
Retirement/savings plan statements From one year to permanently

  • Keep the quarterly statements from your 401(k)/403(b) or other plans until you receive the annual summary; if everything matches up, then shred the quarterlies.
  • Keep the annual summaries until you retire or close the account.
Bank records From one year to permanently

  • Go through your checks each year and keep those related to your taxes, business expenses, home improvements and mortgage payments.
  • Shred those that have no long-term importance.
Brokerage statements These statement are all on-line so it is not necessary to keep any of them. The Brokerage firms (Schwab, Fidelity, TD, Merrill Lynch, etc.) are now required to track the cost-basis of your account holdings.
Bills From one year to permanently

  • Go through your bills once a year. In most cases, when the canceled check from a paid bill has been returned, you can shred the bill.
  • However, bills for big purchases — such as jewelry, rugs, appliances, antiques, cars, collectibles, furniture, computers, etc. — should be kept in an insurance file for proof of their value in the event of loss or damage.
Credit card receipts and statements From 45 days to seven years

  • Keep your original receipts until you get your monthly statement; shred the receipts if the two match up.
  • Keep the statements for seven years if tax-related expenses are documented.
Paycheck stubs One year

  • When you receive your annual W-2 form from your employer, make sure the information on your stubs matches.
  • If it does, shred the stubs.
  • If it doesn’t, demand a corrected form, known as a W-2c.
House/condominium records From six years to permanently

  • Keep all records documenting the purchase price and the cost of all permanent improvements — such as remodeling, additions and installations.
  • Keep records of expenses incurred in selling and buying the property, such as legal fees and your real estate agent’s commission, for six years after you sell your home.
  • Holding on to these records is important because any improvements you make on your house, as well as expenses in selling it, are added to the original purchase price or cost basis. This adds up to a greater profit (also known as capital gains) when you sell your house. Therefore, you lower your capital gains tax.