Are your files bulging with important tax documents, monthly statements, and paid bills? Before you become overwhelmed by the urge to pull and dump, review the guidelines regarding how long to maintain your important records.
Most of the paper delivered to your mail box or received from the sales clerk can be provided electronically. Once stored on the financial institution’s website, the information is always available for viewing and/or downloading to your own secure file. If you become comfortable with accessing via the Internet, your paper piles can be greatly reduced.
While “paperless” is the green way, until you are comfortable, you may prefer receiving hard copies of your documents for various reasons. The question then becomes “how long to maintain”.
Whether electronic or paper, here are a few important guidelines:
Income Tax Returns
Retain permanently. After seven years, you can discard the supporting documentation, but keep the returns.
Bank Accounts
Monthly statements that include copies of cancelled checks should be maintained until after each year’s tax return has been prepared. Withdrawal and transfer slips can be disposed of after the transactions appear correctly on your monthly statement. For tax purposes, deposit records for gifts or other large non-payroll related payments should be kept for seven years as evidence of the source of funds.
Credit Card Statements and Receipts
Retain statements until that year’s tax return is filed unless needed for long term tax records, then keep with the tax return. Retain receipts until they appear correctly on your statement. Exceptions are receipts for items that you may want to return, that are under warranty, or that are tax related. Once the purchase appears on your statement, your statement can serve as your record.
Paid Invoices and Bills
Unless tax-related, you can discard when the payment has been confirmed.
Pay Check Records
Maintain the final pay record for the year, which shows the accumulated totals. All others can be discarded.
Investment Records
Retain evidence of the cost of an investment for seven years after the investment is sold. “Purchase” and “sale” confirmations can be disposed of once the transaction is confirmed on your statement. Monthly statements should be maintained until account is closed and information is no longer needed for tax purposes. In some cases a comprehensive year-end statement is suitable to be kept in place of the monthly statements.
IRA Records
Retain for seven years after you close your IRA. It is important to retain records showing non-deductible contributions to an IRA. In addition, you must file Form 8606 with your tax return to track the accumulated total of non-deductible contributions.
Social Security Reports
Maintain the most recent annual statement illustrating earning and projected benefits. Once you have verified that your earning amount has been reported accurately, the previous year’s statement can be destroyed.
Residence Records
For tax purposes, retain for seven years after you sell or move. If you own your residence, you need to maintain purchase related documents, mortgage and tax assessment papers, receipts for improvements, etc. If you have inherited your residence, maintain the estate tax return showing the value. If you rent your residence, maintain a copy of your lease, cancelled checks, and any correspondence or agreements with the landlord.
Insurance Policies:
Property
For home, auto, and other vehicles, dispose of the policy when there is no possibility of a claim and the policy has been replaced or the property disposed of.
Insurance Claims
Maintained at least one year after payment or for seven years if tax related.
Life
Dispose of terminated policies only when there is no cash value and no chance of reinstatement (usually five years).
Health
Dispose of only after it has totally expired or lapsed and credible coverage documentation is no longer necessary.
Personal Information
Maintain permanently the following certificates and papers: birth/death, marriage/divorce, religious ceremonies, diplomas, adoption/naturalization papers, military discharge papers, court orders on personal issues, passports, and Social Security cards. You may want to maintain a copy of these documents in your home file and the originals in a safe deposit box.
Wills and Trusts
Once you totally rewrite a will or trust, the obsolete documents and copies should be destroyed. If you amend a document, the original document must be retained with the amendment. For any terminated or liquidated trusts, the documentation should be maintained for seven years for tax purposes.
Autos, Boats, other Vehicles
Keep all documents of ownership while you own the vehicle, e.g. title, warranties, registrations, etc. If the vehicle is sold, your transfer of title records and license plate transfer should be maintained. All other records can be disposed of unless there are legal claims pending.
Don't Toss…Shred!
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The material has been gathered from sources believed to be reliable, however Bedel Financial Consulting, Inc. cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. To determine which investments or planning strategies may be appropriate for you, consult your financial advisor or other industry professional prior to investing or implementing a planning strategy. This article is not intended to provide investment, tax or legal advice, and nothing contained in these materials should be taken as such. Investment Advisory services are offered through Bedel Financial Consulting, Inc. Advisory services are only offered where Bedel Financial Consulting, Inc. and its representatives are properly licensed or exempt from licensure. No advice may be rendered unless a client agreement is in place.
