Personal Record Keeping

A common New Year’s resolution is to “declutter”, go through those boxes and drawers and clean out the piles of excess paper. Old paper documents can be a source for identity theft. Piles of paper may provide no useful information while actually posing a financial threat. At least once a year you should go through your files and shred anything you no longer need. But what should be kept and how long should you keep it?
Tax Returns. The general rule is that tax returns with supporting documentation should be kept for seven years. Those who are especially cautious keep the return permanently but dispose of the supporting documents after seven years.
Bank Statements. Keep these for a year. Since check images are returned rather than cancelled checks, you may want to keep the images for tax payments and large purchases longer. The bank can provide copies of cancelled checks when required.
ATM Receipts, Deposit Receipts. Keep until you balance your bank statement.
Credit Card Statements. Keep these for a year.
Investment Documents from 401k’s, IRA’s or Brokerage Accounts. When you buy and sell stock, you receive trade confirmations. These need to be kept until the transaction appears on the investment statement. The investment and year-end statements should be kept permanently. The myriad of other paper related to investments (prospectus, proxy notices, etc.) only need to be kept if you are going to act on it.
Pay Stubs. Most pay stubs contain current and year-to-date information. If this is the case you need only save the most current. At most, save until you receive and verify your W-2.
Medical Bills and Insurance. These should be kept with the tax returns.
Home Insurance. Keep policies from current and prior insurers for at least five years. If you think you might have issues in the future, keep ten years.
Home Repairs and Renovations. Depending on the extent of the work, receipts for repairs should be kept up to 10 years. Home renovations impact the cost basis of your home and should be kept until you sell your home. The documentation must be kept for as long as the tax return on which the sale was reported is kept.
Mortgage Documents. Keep for the duration of the mortgage. On payoff, you should receive a loan satisfaction letter. Keep this until you sell the home.
Utility Bills. Only need to be kept if you are writing off the expense on your taxes.
Receipts. Keep credit card receipts until you verify the purchase on your credit card statement. Keep receipts for any purchase you may return if you are not satisfied with the product, usually a minimum of 30 days. Receipts for products with a longer warranty should be kept with the warranty until the product is discarded.
The above are general guidelines to record retention for personal papers. The first effort to organize may seem difficult. But once accomplished, an annual sift, file, shred task will go more quickly then you would think.


IRS Circular 230 Disclosure


Pursuant to U.S. Treasury Department Regulations, we are now required to advise you that any federal tax advice contained in this communication, including attachments and enclosures, is not intended by the Sender or Sandra G Johnson, CPA, P.C. to constitute a covered opinion pursuant to regulation section 10.35 or to be used for the purpose of (i) avoiding tax-related penalties under Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any tax-related matters addressed herein.

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