By Christine Frietchen on February 19, 2010 in
For many of us, filling out tax forms isn't really that painful. Instead, it's going through the piles of credit card receipts, pay stubs, old utility bills and medical statements that's the real pain in the you-know-what. If you're like me, you start the year off well enough -- making separate envelopes for each expense type or receipt. But by March, I'm pretty much just stuffing everything into the same shoe box. By the time I'm ready to get my tax stuff together, it takes me a weekend to dump out my stuff and sort out what I need. So, resolving to do better this year, I'm starting by coming up with a definitive list of which financial records to keep -- and how long to keep them -- along with what can go straight to the shredder.
There are a lot of articles out there on this topic. It seems like most finance magazines have some advice. Not all of them match up, though, and some of their recommendations seem like more work than necessary. For example, Kim Lankford of Kiplinger's Personal Finance magazine, in an interview for CBS, says that I should keep copies of my tax returns forever, but it's okay to shred the supporting documentation (relevant receipts, W-2s and worksheets) after three years unless I'm self-employed, in which case I can start shredding the supporting stuff after six years. Other sources, such as Bankrate.com, say seven years for everything, while the official IRS guidelines say that most people can toss copies of tax returns and supporting documents after just three years.
So after reviewing the scattered advice we found, here are the takeaways:
| Type of record |
How long to keep? |
| Copies of old tax returns |
Keep copies along with supporting documents for 6 years The IRS has three years to find good-faith errors, but they have six years to cite you for under-reporting income. |
| Credit-card statements |
Shred them as soon as your payment is posted UNLESS your statement contains: Charitable contributions (6 years) Mortgage or insurance payments (as long as you own your home) Major purchases like cars, computers or expensive electronics (for home insurance and warranty records) |
| Bank statements |
Basically, the same as credit-card statements.You can shred monthly bank statements as soon as you've checked them over for accuracy. But keep copies of canceled checks related to charity, insurance and mortgage payments, or other tax-related items like checks to the IRS. |
| Utility bills |
Shred after your payment is posted. However, if you take a home-office deduction on your tax return, keep them for six years. |
| Brokerage statements |
Keep until you sell the security and report the gain/loss. You can shred quarterly statements once you're sure they match your yearly summary statement. |
| IRA statements |
Keep until you withdraw funds. However, you don't need to keep the quarterly statements once you're sure the info matches the yearly summary statement. |