Well, it’s a new year and with the new year comes time to purge, archive and shred old files – yay purging! It’s also time to get ready for taxes, which I know just tickles you to the tips of your toes, right? (That was dry sarcasm, for those of you not familiar with my wittiness. 😉
So…what records exactly do we have to keep and for how long? Here is an easy breakdown from Consumer Reports article, How long to keep tax records and other documents:
You have 4 categories of documents:
Keep Less than 1 Year
- ATM, bank deposit and credit card receipts: Â Compare with your monthly statements then shred to avoid ID theft.
- Electronic files: Â Securely trash unless you need them for tax return support.
- Insurance policies and investment statements: Â Until new ones arrive.
Keep 1 Year or More
- Loan documents: Â Until paid off. Toss after.
- Vehicle titles: Â Until sold. Title goes with new owner.
- Investment purchase confirmations: Â Until sold so you can establish cost basis and holding period (if these appear on annual statements, keep just the annuals).
Keep 7 Years
- Tax records: Â Electronic and paper.
- If you fail to report more than 25% of your gross income on your tax returns, the IRS has 6 years to collect the tax or start legal proceedings.
Keep Forever
- Birth and death certificates
- Marriage licenses
- Divorce decrees
- Social security cards
- Military discharge papers
- Defined-benefit plan documents
- Estate-planning documents
- Life insurance policies
- Inventory of bank safe-deposit box
How to Store your Files
In a Fireproof Safe or Password-Protected Electronic File:
- Bank and investment statements
- Estate-planning documents
- Pension information
- Insurance policies
- Pay stubs
- Tax documents
- Safe-deposit box inventory list
In a Safe-deposit Box:
Get this at a bank near you. Approximately $50-60 annual cost. Well worth it as if you ever lose any of these documents, the cost and sheer headache to replace them is easily worth the annual fee.
- Original birth and death certificates
- Social security cards
- Passports
- Life insurance documents
- Marriage and divorce decrees
- Military discharge information
- Vehicle titles
- Inventory of home contents
- Loan documents