TAX RETURNS: After filing a tax return, keep substantiating records – tax returns,
canceled checks, receipts for deductible expenses – for at least seven years. The Internal
Revenue Service has three years after the filing date to audit a return; six years if the taxpayer
omits more than 25% of gross income; and unlimited time if fraud is involved. Documents
relating to the cost basis of assets should be retained for three years beyond the tax year in which
the asset is disposed of.
IRA CONTRIBUTIONS: You’ll want to keep these records permanently. This is
especially important for nondeductible IRA contributions, since you might need to prove that you
already paid tax on some of the IRA dollars.
401(k) AND OTHER RETIREMENT PLAN STATEMENTS: Keep your monthly
statements until you get the annual statement. Then you can discard the monthly statements.
Hold onto the annual statements until you retire or close the retirement plan account.
BANK RECORDS: At tax time each year, sort through your checks and keep the ones
for deductible personal expenses, home renovations, business expenses and your mortgage. Then
toss the rest.
BROKERAGE AND MUTUAL-FUND STATEMENTS: Be sure to hang onto all
purchase and sales slips. This way, you can determine your gains and losses for tax purposes.
As with retirement plans, keep your quarterly brokerage and mutual-fund statements until your
annual statements arrive, and keep end-of-the-year statements indefinitely.
BILLS: The only ones you really need to keep are for large purchases such as home
computers, jewelry, cars and antiques. They’ll come in handy if you need to prove the value of
your belongings for insurance purposes.
CREDIT-CARD RECEIPTS AND STATEMENTS: You should keep the receipts
until you get your monthly statement. Then you can discard the receipts, if everything matches
up. Hold onto your credit-card statements for seven years, for tax purposes.
PAYCHECK STUBS: You really need to keep these for only a year.
HOME-RELATED DOCUMENTS: Permanently keep records showing the purchase
price, the cost of home improvements, and expenses for buying or selling the home. These will
all be useful for tax purposes when you sell. Keep these records even after selling your house.
INSURANCE POLICIES: Hold onto these as long as the policies are still in force.
Keep Title Insurance Policies on real estate permanently.