How Long to Keep Tax Records and Other Documents

Tax season is the perfect time to start culling your paper piles and computer files and getting everything in order.
If you’re meeting with a financial adviser or an attorney, you don’t want to spend hours wading through clutter to find the documents you need. If there’s a fire, flood, or theft, you’ll need access to essential documents quickly. And if you become ill, well-organized paperwork will make it easier for your loved ones to locate your health-care power of attorney, insurance policies, medical records, and outstanding bills.
Divide your financial papers into four categories: Papers that you need to keep for the calendar year or less; papers that can be destroyed when you no longer own the items they cover; tax records, and finally, a category for papers to keep indefinitely.
Keep for less than a year
In this file, store your ATM, bank-deposit, and credit-card receipts until you reconcile them with your monthly statements. Once you’ve done that, shred the paper documents (to avoid ID theft) or securely trash electronic files unless you need them to support your tax return. Keep insurance policies and investment statements until new ones arrive.
Keep for a year or more
You’ll want to hold onto loan documents until the loan is paid off. That will often be for more than a year. Then toss those papers out. If you own one or more vehicles hold onto the titles until you sell them. If you have investments in stocks, bonds, mutual funds or anything else, keep the investment purchase confirmations until you sell the investment so you can establish your cost basis and holding period. (If that information appears on your annual statements, you can keep those instead.)
Keep for seven years
If you fail to report more than 25 percent of your gross income on your tax returns, the government has six years to collect the tax or start legal proceedings. So keep tax records—electronic and paper, just in case.
Keep forever
Essential records such as birth and death certificates, marriage licenses, divorce decrees, Social Security cards, and military discharge papers should be kept indefinitely. Also hold on to defined-benefit plan documents, estate-planning documents, life-insurance policies, and an inventory of your bank safe-deposit box (share a copy with your executor or your attorney).
How to Store Your Files
Use a fireproof safe or password-protected electronic file for the following: Bank and investment statements, estate-planning documents, pension information, insurance policies, pay stubs, tax documents, and your safe-deposit box inventory list.
Invest in a safe-deposit box for papers that can’t be easily replaced: Original birth and death certificates, Social Security cards, passports, life-insurance documents, marriage and divorce decrees, military discharge information, vehicle titles, an inventory of your home’s contents (in case you need to make an insurance claim), and loan documents.
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Posted on April 4, 2016 at 9:50 am
Nancy Low | Category: News

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