(Prosperity - Laura E Kirkpatrick)
Financial archaeology. Sounds impressive - like reconstructing the financial systems of ancient cultures. But it's really mining your files to makes sure you're keeping all you need to keep, and not a lot of extra papers you don't need to keep around. To help with your Financial Spring Cleaning, Prosperity built the table below as a guide on how long to keep important documents around.
As a note of caution - odds are like any smart woman you're not only paying bills online but have gone 'green;' you don't get paper records for all of your bills. Match the document retention policy of anyone you pay online to your current records - it's a hassle to have to requisition your utility for a past bill. For any discrepencies, consider saving your documents as PDFs, or the electronic version of your choice (most bills online will give you a print version that you can save as a PDF). This not only saves paper, but also shelf space. Speaking of PDFs, here's a lite version of the list below.
| What To Keep and For How Long | ||
|---|---|---|
| What To Keep | Why | How Long |
Bills |
Most experts recommend keeping a bill until the canceled check has been returned. In the age of direct payments and autorenews, it's smart to keep bills around for a year. |
I Year |
| If these bills are related to your business, keep them with other tax documents. | 7 Years | |
| Receipts for big ticket items | If you’re buying something big from a nice piece of bling, to the house of your dreams, keep the receipt for insurance, and possible tax purposes. Establish an “Insurance” file for everything you have insurance on, and keep all bills and receipts for these good with the policies. As long as we’re on the topic of insurance, experts also recomend having photographs or a video of your house, for insurance purposes. |
Permanently |
| Credit Card Receipts and Statements | Keep receipts to reconcile with monthly statements. Then toss if it all matches up. Again, if these are business related, keep the receipts around for tax purposes. |
45 days |
| 7 Years | ||
| Tax Returns | If the IRS thinks you underreported your gross income by 25 percent or greater, it has six years to challenge your return. There is a three year statute on audits for returns filed in good faith. You also have a three year deadline to amend a return. |
7 Years |
| IRA Contributions | Keep all records of non-deductable contributions to an IRA in order to prove that you already paid money when you start to withdrawl money from this account. What type of IRA you have will tell you whether the contribution is deductible or not. |
Permanently |
| Retirement/ Savings Plan Statements |
Keep quarterly statements from all retirement plans until you receive the annual statement. If everything reconciles, purge the quarterlies. Keep the Annual Summaries until you retire or close the account. |
1 Year |
| Permanently | ||
| Brokerage Statements |
These slips are crucial for taxes, they prove whether you have capital gains or losses. |
Until you
sell the security. |
| Paycheck Stubs | Match your stubs to your annual W-2 from your employer. If everything matches, toss the stubs. ( If it doesn’t, demand a W-2C, a corrected form)
|
1 Year |
| Bank Statements | Experts advice on this differs. The only reason to keep them around is to have record of your financial health, and for tax purposes.Kiplinger.com says no more than one year. However, if the statements refer to your business, keep them around for seven years. |
1 year plus, depending on your peace of mind |
| Canceled Checks | If the checks pay alimony, charitable contributions, mortgate interest, retirement plan contributions or business expenses, keep them around for tax documentation.
|
7 Years |
| Buying A House | Keep any record tied to the expenses of selling or buying a house, including legal fees and any commissions paid, for seven years after you buy or sell.
|
7 Years |
Keep all records from purchase price and the costs of permanent improvements. These records are important as they lower your cost basis, if you are liable to pay capital gains taxes when you sell the house, and may lower your capital gains tax. |
Permanently | |
| Insurance Papers | Six years after the expiration of the policy.Policies often cover risks terminated only by statute of limitations - that is, you may need to use the policy after it has expired. |
+6 years |
| Sources: bankrate.com, irs.gov, lifeorganizers.com, iarfc.org, kiplinger.com |
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