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Saving & Organizing Financial Records
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Hi, does any one know that how long we should keep taxes returns, bank statements, utility statements, mortgage paper, escrow papers for old and current houses, anything you can think of that I should keep or throw away. Thanks, Lisa
I just cleaned out a bunch of file drawers and have 3+ grocery bags of 1996-1999 bank statements, receipts, paid bills, etc. Sigh....aaaaahhhhhhh that felt SOOOOOO good. I'm wondering how to dispose of all these things with our names, address, bank account number (we still have the same bank account). Seems like a no brainer to shred (or have a big camp fire), but am I wasting my time: It's a lot to shred. If we just put it in recycling is that chancey that someone could be savvy enough to get our bank number and cause tremendous trouble? Thanks for any advice on this. June
What is the rule of thumb for keeping financial records - past bank statements and checks, previous refinancing records, state and federal tax records, paycheck stubs,etc.? We own our home, so I keep receipts related to all work done on it. Advise appreciated. Thanks, Wants to lighten her load
Is there a rule of thumb as to how long one keeps personal financial records such as bank and mortgage statements, records of bills, taxes, insurance policies, refinancings, etc' I tend to keep it all from years past thinking I will need some of this info. Any advice on what to keep, what to toss greatly appreciated. Paper Pack Rat
What to throw out and when:
1. Airline tickets and boarding passes: after appear on frequent-flier account, unless you need them for tax purposes
2. ATM cash receipts: after appear on bank statement
3. Credit card statements and receipts: Toss receipts after appear on statement, except big-ticket items or tax deductible expenses. Keep statements for three years (in case IRS asks)
4. Paycheck stubs: toss after receive W2 and check for errors
What to keep and for how long:
1.Tax stuff: keep copies of completed tax forms and W2 forms for at least six years (I have heard even longer). After three years you can get rid of supporting documents (receipts, canceled checks, etc)
2.IRA contribution slips: never throw out receipts for deductible and nondeductible IRA contributions. (you'll need them to figure out taxes when you retire)
3. Bank statements: keep for three years. Toss canceled checks unless back up deductions.
4. Warranties and receipts for big-ticket items: as long as you own the item (for warranty, resale or insurance purposes)
5. Home-improvement records: as long as you own the house
6. Investment information: as long as you own the investment, and for six years after you sell it Melissa T
What to throw out and when:
All tax-return-related documentation should be kept until the statute of limitations on your tax returns runs out. The statute of limitations is generally 3 years for Federal and 4 years for California. However, if the auditors can claim that you understated your income by 25%+ on the tax return, the statute of limitations for that year becomes 6 years, and if they can show fraud on the tax return, the statute of limitations never runs out on that return. The count of statute of limitations starts from the day you paid your tax liability for that year in full or filed your tax return for that year, whichever comes the latest.
This applies to tax returns themselves (which IRS & FTB already have) and especially to all supporting documentation (which you and your tax preparer have). This is one good reason to hire a C.P.A. to do your taxes, did I mention?
This applies to (and not limited to):
Credit card statements and receipts (but original store receipts are always better) for tax deductible expenses.
Not only W-2, but also the very last pay stub for each year (some deductible items do not show up on W-2, for example, union dues)
IRA contribution slips: If your investment company keeps records for you and the records are correct, it is OK to not keep these slips at all. Always keep deductible, non-deductible & Roth IRAs in separate accounts.
Bank statements: it's your call. If you withdraw money from one account and deposit it into your other account, and all IRS finds on its own is the deposit, they will claim it was your taxable income, whereas in fact it was not. You may or may not remember the fact of transfer without the help of a bank statement, and your bank may or may not be able to provide you with another copy of their statment even if you remember. I recommend to save them with all other tax records, just in case.
Home-improvement records: as long as you own the house PLUS until the end of your statute of limitations for the year you disposed of the house.
Investment information: same rule as IRA records.
Some additional thoughts on this issue:
There are some times when you want to retain records longer than the minimum of 3 years. That's when you have a carryforward loss. For example, in 2002 you have a net operating loss that you will be carrying forward. Because of losses in 2003, 2004, and 2005 you don't use the loss until 2006. Keep your records for the 2002 year for three years after filing your 2006 return.
State rules vary widely. While the 3-year rule is the most common, some states require you to keep income tax records for 7 years; sales tax records for 6.
Special rules apply to payroll and employee records.
There's no time limit if the IRS or state can show fraud or if you didn't file a return.
Talk to your attorney and accountant.
Maria Ku, C.P.A.
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