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Financial Papers – What to Keep and What to Toss

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During tax season, you probably find yourself surrounded by piles of papers—and find yourself wondering how long to keep all that stuff. For tax documents and all your other financial paperwork, here’s your answer.

What: Tax returns (including receipts and supporting documents).
How Long to Keep: Up to six full years.
Why: The IRS can audit a return up to three years after you’ve filed. The agency can challenge your return for up to six years if it suspects you under-reported your income by 25 percent or more.

What: IRA contribution records.
How Long to Keep: Permanently.
Why: Keeping these forms—like IRS Form 5498 and 8606—may prevent you from paying too much tax when you tap your retirement stash.

What: Investment and real estate records.
How Long to Keep: Seven years after you sell.
Why: They help track your cost basis—and the taxes you owe when you sell. Shred your monthly statements and save the annual summaries.

What: Bank statements and checks.
How Long to Keep: One month to seven years, depending on whether your bank has them available online.
Why: You could need them if you’re audited by the IRS. If you haven’t already, switch to receiving your bank documents online. Your bank may have past statements available online.

What: Credit card statements and bills for non-deductible items.
How Long to Keep: Shred immediately after the next statement arrives.
Why: You don’t need them once you confirm the charges and have proof it was paid.

What: Form W-2: Wage and Tax Statement.
How Long to Keep: Until you start receiving Social Security benefits.
Why: Usually your best proof of earnings for Social Security.

What: Pay stubs.
How Long to Keep: Until the end of the year.
Why: Not needed once you get your W-2.

What: Insurance policies.
How Long to Keep: Until they expire—except for liability policies with “occurrence” coverage.
Why: Occurrence-based policies cover you for damages that occur while the policy was in effect—even if the claim happens after coverage expires.

What: Receipts.
How Long to Keep:

  • Day-to-day debit/credit: Toss after confirming the amount charged is correct.
  • Big-ticket item: Keep with other purchase documentation for proof of value in case of loss or damage.
  • Charitable donations: Store and keep for tax-filing purposes.

Why: Depending on the type, amount and reason for the purchase, they may be necessary for insurance- and tax-filing.
Where to Keep Them
No one wants to turn a closet or attic into a fire hazard, so save strategically.

  • Keep original contracts like life insurance policies and legal documents like wills in a fireproof safe or box.
  • Separate your temporary tax documents and permanent documents (IRA contribution Form 8606, Forms 5498 and 1099-R for IRAs) into different files by year. Keep the papers until all distributions are made.
  • Group your receipts and warranty documents together in a single storage box or file.

Automate and Go Green
Reduce future clutter—and save some trees—by going electronic.

  • Store USAA documents simply, securely and electronically with USAA Documents Online.
  • Arrange for utility and other bills to be sent by email.
  • Automatically pay your bills electronically through USAA Web BillPay.
  • Use a scanner to replace key paper documents with electronic versions. Be sure to create a backup file that’s stored in a separate location.

Originally published on USAA


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