With federal tax day having passed for the year, a common question is how long do you need to keep your tax return and the documentation applicable to it?
As you can read here on the IRS web site, you should keep your returns and documentation for at least three years. If you happened to underreport your income by 25%, you can be audited back six years.
Also somewhat comically noted on the IRS web site: “Keep records indefinitely if you file a fraudulent return.”
The IRS also notes that your insurance company or creditors may have different requirements that you should be aware of.
What follows is a general guide (but not specific personal advice) for how long to keep the financial and estate-oriented paper in your life:
|Investments||Capital gains tax reports and 1099s – hold for at least three years with tax return. If your cost basis is not reflected on your statement (in taxable brokerage accounts – not necessary in IRAs) keep trade confirmations that can prove the basis over time. Prospectus and annual reports can be shred immediately after reviewing.|
|IRA contributions||Especially if you make non-deductible contributions to an IRA, maintain as long as the account is open. With deductible IRAs and Roth IRAs it may be wise to keep track of your total contributions.|
|Pay stubs||Once you’ve balanced your bank accounts, you don’t need to keep paychecks. However, some lenders might require 3-6 mos. of stubs if you want to refinance or buy a new home so plan ahead of that is the case.|
|Bank statements||Keep for 3 months if you are planning to apply for mortgage. Otherwise shred after checkbook has been balanced.|
|401K plan statement||Keep your end of year statements and quarterly statements for the current year.|
|Credit card statements||3 months|
|Checks||Until checking is balanced. If business related – 7 years|
|ATM, credit card receipts||Keep until checkbook has been balanced, credit card statement received|
|Life insurance policy and premium payment evidence||Until policy expires|
|Loans||Keep statement with current balance, retain final payment evidence 7 years|
|Medical records||Medical insurance statements, doctor’s bills, prescriptions and hospital bills should be kept for five years from date of service|
|Monthly bills||Shred once payments clear on bank statement|
|Warranties||Keep as long as you own product|
|Auto records||Keep as long as you own car|
|Home improvements||Maintain all records improvements until home is sold to prove cost basis|
|Personal documents||Birth certificates, adoption paperwork, education records, professional licenses, military records, marriage licenses, divorce decrees and death certificates should never be discarded|
~ Brooks, Hughes & Jones — Wealth Advisors — Tacoma, WA