You can't take everything with
you, but the following are suggestions about how long you should
keep personal finance and investment records on file:
Financial records timeline
Type of record
Length of time to keep
-- and why
Taxes
Returns
Canceled
checks/receipts (alimony, charitable contributions,
mortgage interest and retirement plan contributions)
Records for tax
deductions taken
Seven years
The IRS has three years
from your filing date to audit your return if it suspects
good faith errors.
The three-year deadline
also applies if you discover a mistake in your return
and decide to file an amended return to claim a refund.
The IRS has six years
to challenge your return if it thinks you underreported
your gross income by 25 percent or more.
There is no time limit
if you failed to file your return or filed a fraudulent
return.
IRA contributions
Permanently
If you made a nondeductible
contribution to an IRA, keep the records indefinitely
to prove that you already paid tax on this money when
the time comes to withdraw.
Retirement/savings
plan statements
From one year to
permanently
Keep the quarterly statements from your 401(k)
or other plans until you receive the annual summary;
if everything matches up, then shred the quarterlies.
Keep the annual summaries until you retire or
close the account.
Bank records
From one year to permanently
Go through your checks each year and keep those
related to your taxes, business expenses, home improvements
and mortgage payments.
Shred those that have no long-term importance.
Brokerage statements
Until
you sell the securities
You need the purchase/sales
slips from your brokerage or mutual fund to prove whether
you have capital gains or losses at tax time.
Bills
From one year to permanently
Go through your bills once a year.
In most cases, when the canceled
check from a paid bill has been returned, you can
shred the bill.
However, bills for big purchases
-- such as jewelry, rugs, appliances, antiques,
cars, collectibles, furniture, computers, etc. --
should be kept in an insurance file for proof of
their value in the event of loss or damage.
Credit card receipts
and statements
From 45 days to seven
years
Keep your original receipts until you get your
monthly statement; shred the receipts if the two
match up.
Keep the statements for seven years if tax-related
expenses are documented.
Paycheck stubs
One year
When you receive your annual W-2 form from your
employer, make sure the information on your stubs
matches.
If it does, shred the stubs.
If it doesn't, demand a corrected form, known
as a W-2c.
House/condominium
records
From six years to permanently
Keep all records documenting the purchase price
and the cost of all permanent improvements -- such
as remodeling, additions and installations.
Keep records of expenses incurred in selling and
buying the property, such as legal fees and your
real estate agent's commission, for six years after
you sell your home.
Holding on to these records is important because
any improvements you make on your house, as well
as expenses in selling it, are added to the original
purchase price or cost basis. This adds up to a
greater profit (also known as capital gains) when
you sell your house. Therefore, you lower your capital
gains tax.
Source: Marquette
National Bank and Catherine Williams,
President of Consumer Credit Counseling Services of
Greater Chicago
