Tax season has just ended, you have a pile of tax records. How long to keep tax records? We have so many types of financial accounts and the statements that go with it too.
We can’t keep everything forever, but if we ever get into an unfortunate situation with Uncle Sam, we need every possible evidence to substantiate an expense or an income. The length of time you should keep a document depends on the action, expense, or event the document records. Here is a list of documents and the time line on how long to keep your financial records.
How long to keep tax records?
Keep your tax returns for 3 years at the very least. The statute of limitation for IRS to come after you for back taxes is 3 years, that is where the number comes from, but it is recommended to keep your tax records for 7 years. Because if you failed to report any of your income, the statute of limitation is 6 years. That is the rule of thumb, if you have a special situation, the time varies. Here are some special case situation from IRS
- If you filed fraudulent tax return (why would you do that?), keep your tax records for ever.
- You didn’t file a tax return, then keep all your tax related records indefinitely. (Even if you don’t owe taxes it might be a good idea to file the tax return here is why – Do I need to file a tax return?)
- You claimed loss from worthless securities in your tax return, hold on to your records for 7 years.
- All employment tax records needs to be kept for at least 4 years after the tax was due or paid.
- You claimed a bad debt deduction, keep the records for 7 years.
Source : IRS
How long to keep bank statements :Checking/savings account
Deposit receipt: Until to see the transaction cleared
Canceled check: If it is the only proof of a tax related expense, save it for 7 years. If it is the only proof of a home improvement related expense(that can be added when you sell your home to reduce capital gains) keep it until you sell your home + 7 yrs.
Statements: Similar to canceled checks. If there are transactions related to tax (income, expenses, charitable donations) save it for 7 yrs or else 1 year. At the end of the year, reconcile the interest deposited with 1099 or any other business deposits and shred the ones that you don’t need.
Receipts
In general if you are tracking every penny you spend have them until you have recorded the amount in an excel spreadsheet or any other tool you are using for that purpose, then toss it. If you are not tracking all the transactions, save the receipts for upto 1 month until you get the monthly statement, then shred the receipts if there are no errors in the statement.
Keep the receipts for longer in the following cases:
- Any of the purchases is business or tax related, you should hold on to it for 7 yrs.
- The purchase is related to home improvement, retain it until you sell the house + 7 yrs.
- The product has a warranty then keep the receipt for the period of warranty.
- You are buying a big ticketed item, save the receipt for insurance purposes (Home owners/Renters insurance).
Credit card Statements
Same as checking account statements, if there are tax related expenses, retain it for 7 yrs.
Utility bills
File the first (for any deposits/installation cost paid) and the last bill (to make sure there was no balance amount) for 3 – 10 yrs based on the state’s statute of limitations (In case they come after you for not returning a cable box or not paying the last month’s bill).
Exceptions: If you taking a home office or business expense deduction, then save the utility bills for 7 yrs.
Income statements
Monthly paystubs: For 1 yr. When you get your W2, if it matches your monthly statement then shred the paystubs.
W2: For 7 yrs
Investment statements
401k/Traditional IRA statements : Save the most recent quarterly statement. When you get the year end statement you can shred all the quarterly statements. Keep the annual statement for ever.
Roth IRA/Non-deductible IRA : Indefinitely. Along with the tax (IRS Form 8606) form to prove that you already paid taxes on it.
Bonds: Until you cash out the bond (you can convert your Series E, EE and I paper bonds to electronic bonds using SmartExchange). Electronic securities are much more convenient and safer.
Other Investments: Retain the purchase slip/receipt as long as you own the investment. This will help determine the cost basis and capital gain/loss.
Home
Mortgage Documents: Until you sell the house + 7 yrs
Other documents: All records documenting purchase price plus any renovations (receipts from contractors, home improvement receipts), until you sell the house + 7 yrs
Other
These are not required for tax returns, but useful to save them for sometime, for other purposes.
Social Security Statement: Retain the latest one and review it as soon as you receive it for accuracy.
Credit reports or any other consumer reports : Check for accuracy, if nothing is wrong shred it.
Insurance Policies : Save the most recent one. The older policies no longer apply (unless you have an ongoing claim; in which case save it until the claim is closed).
{ 8 comments… read them below or add one }
This is really useful to know!
So far I’m keeping my stuff forever! Perhaps, I should reconsider
7 yrs. seems to be the norm!
I keep stuff some documentation way longer than I need to.
@Shawn @MoneyReason if you have the space to store everything and it is organized in such a way you can find it
then great! With the electronic statements it is easier I suppose, we have some documents digitized and stored for ever for immigration reasons. But the rest, even the digital copies goes after 7 yrs because I am not a great organized if I have too much I will spend too much time looking for the right document. One of my goals this year is to completely organize and have a personal finance organizer. Lets see if I succeed 
So much of my stuff is electronic now that I barely have paper copies of anything recent!
My grandma was so funny. I filed her taxes for her, and each year, she made me shred the tax document that was 8 years old. She was such an organized woman!
Kris, just a word of caution with the electronic copies… we have everything electronic too… but we make it a point to save the statements that have tax deductible expenses, if we are using them for tax that is. As a pdf file and have a folder that gets deleted after 7 yrs. Because with companies changing/merging/bought over it is better to have a local copy. We lost all the statements we “saved” with washington mutual when they were bought out by chase. Chase started from the scratch and I didn’t save the old ones locally (we needed for our immigration) lesson learned… in a hard way.
Yay for your grandma! Older people are much much more organized than the younger folks
either we will become like that when we get old or we didn’t get that organization gene passed on to our generation..
Great guidelines. I hate the IRS and all their Byzantine rules.
Sometimes when I’m just not sure if a document should be shredded, I simply keep a scanned copy of the document before shredding it.
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