A Guide To Important Document Management - What To Keep & How Long To Keep Them

A guide to Paper Management … What Should you Keep and For How Long? 

Some financial documents need to be kept, others can be scanned and then shredded and tossed.  In this age of paperless documents, scanned images converted to PDF’s are readily accepted in place of the original.

If you haven’t already opted to go paperless, you might be buried in piles of receipts, bills, pay stubs, tax forms and other financial documents. But it doesn’t have to be that way. 

Here’s a guide of which financial documents to keep and for how long.

RECEIPTS Receipts for anything you might itemize on your tax return should be kept for three years with your tax records.

HOME IMPROVEMENT RECORDS Hold these for at least three years after the due date of the tax return that includes the income or loss on the home when it’s sold. If you plan to sell the house, and you have made improvements to it, keep receipts for those improvements for seven years, you may need them to lower the taxable gain on the house when you sell it.

 MEDICAL BILLS Keep receipts for medical expenses for one year, as your insurance company may request proof of a doctor visit or other verification of medical claims.

 PAYCHECK STUBS Keep paycheck stubs until the end of the year and discard them after comparing to your W-2 and annual Social Security statements.

 UTILITY BILLS Keep for one year and then discard — unless you’re claiming a home office tax deduction, in which case you must keep them for three years.

 CREDIT CARD STATEMENTS Keep until you’ve confirmed the charges and have proof of payment. If you need them for tax deductions, keep for three years.

 INVESTMENT AND REAL ESTATE RECORDS Keep for three years, as you may need the documentation for the capital gains tax if you’re audited by the IRS. These records help track your cost basis and the taxes you owe when you sell stocks or properties. Once you receive the annual summaries, you can shred your monthly statements.

 BANK STATEMENTS You’ll need bank statements for up to three years if you are audited by the IRS. If your bank provides online statements, you can switch to receiving your bank documents online and cut down on paper.

 TAX RETURNS The IRS recommends that you “keep records for three years from the date you filed your original return or two years from the date you paid the tax, whichever is later.” If you file a claim for a loss from worthless securities or bad debt deduction, keep your tax records for seven years.

 RECORDS OF LOANS THAT HAVE BEEN PAID OFF Keep for seven years.

 ACTIVE CONTRACTS, INSURANCE DOCUMENTS, PROPERTY RECORDS OR STOCK CERTIFICATES Keep all these items while they’re active. After contracts are completed or insurance policies expire, you can discard these documents.

 MARRIAGE LICENSE, BIRTH CERTIFICATES, WILLS, ADOPTION PAPERS, DEATH CERTIFICATES OR RECORDS OF PAID MORTGAGES Keep these documents forever.

 Information contained in this article regarding document storage times is deemed to be reliable but is not guaranteed by the author and publisher. Please consult a Tax Advisor for verification.