Let’s face it, you can feel overwhelmed with the amount of paperwork that you generate and how much of it you may need to retain. Exactly how long should you hang on to those tax returns, bank statements, 401k records, etc.?
Photo by: Christophe Libert
When it comes to brokerage statements most of the experts claim that you can get rid of the old one when you get a new one, but many people prefer to keep at least 6 months worth of them. Normally your broker keeps a record as well and can produce old ones if necessary; however, you definitely want to hold onto the one that you receive in December (or your annual statement).
Tax returns are something that many people want to hold on to indefinitely, especially if they own a business. However, the IRS guidelines say that you should keep supporting documents on items such as deductions or income until the limitations on that return runs out. The time limit is the length of time that you can amend your return in order to claim a refund or credit, or the leng
th that the IRS is able to assess additional taxes.
Most CPA’s say that 3 to 7 years is fairly standard but they still advise that you keep them forever. The reason for this is that while most audits only go back 3 years if you are ever convicted of a tax felony then that opens the door for you to be audited throughout your entire tax history. Of course the best way to keep this from happening is to not commit tax fraud.
It is recommended that you keep your bank statements for 3 years; this is in support of the IRS audit procedure. The IRS has long accepted electronic paperwork and most banks have this available as well, but, it is always a good idea to have a paper back-up.
For life insurance policies, you first of all want to keep them locked up in a safe place and experts claim that you should keep the policy not just for the entire policy life but add an additional three years to that in case there are any problems that arise in the future, which happens surprisingly often.
Finally, when you are done with all of that paperwork and are weeding out what you no longer need, do not just throw it away. Identity theft is very real and very costly and damaging to the victim, so be sure to shred those important papers as one way of deterring identity thieves. If you own a business you may want to contact a company that specializes in coming to your location and destroying any sensitive information that you may have
on paper.
