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Storing Financial Documents

Posted By Jim On 02/23/2006 @ 1:13 pm In Personal Finance,Shopping,Taxes | 1 Comment

How long do I really need to keep these old pay stubs? What about credit card statements, do I really need to keep old credit card statements or should I shred and recycle them? Let this be your guide to how long you need to keep your old W-2′s, tax returns, credit card statements, and all those other good financial documents you have stored away in that lock box of yours (or a stack of papers if you’re like me). In many cases, electronic versions are around so you could save yourself a lot of space and headache by saving them to files on your computer and burning it to a CD.

Tax Documents – 7 years – These are your W-2′s, donation receipts, or anything else you will need to prove that your tax return is accurate, including the return itself. The IRS can audit you after four years and up to seven years if they believe you’ve committed fraud. You might know you didn’t commit fraud, but the IRS doesn’t, so keep all your documents for 7 years so you can prove you didn’t. I just keep these in a file folder in a box.

Receipts – As Long As The Warranty Is – The warranty is useless to you if you can’t prove how long you’ve owned the product. If you have a business, these receipts are also your proof of expenses so keep these at least 7 years. Unless the product is over a hundred dollars, I don’t bother with the receipt. Also, some credit cards offer you longer warranties than the manufacturer and with them you won’t need a receipt, they have a record of the purchase already in your statement. You could always just staple the receipt to the instruction manual or warranty document and that’d be that.

Identity-Related or Personal Documents – Forever – Your birth certificate, passports, social security cards, and documents like marriage certificates you’ll obviously want to keep forever in a very safe place. I also don’t really understand people who carry around these documents in their wallet or purse, you’re only asking for a disaster to occur. Replacing a birth certificate (and a social security card) is such a headache, keep those safely tucked away at home for the one time a year you’ll need it.

Investment Documents – 7 years – If you have capital gains or losses in a year, you’ll want to keep those documents for seven because they’re considered tax documents. Otherwise, they’re really of little value to you so you can just dump them. If you are audited and don’t have the documentation, the cost basis of the stock is assumed to be $0! My brokerage (and probably yours) keeps electronic versions of your documents for a long time so the paper versions are just a waste of space. Check to see how long your brokerage archives your documents.

Bank & Credit Card Statements – six months – Usually you want to review these, preferably online on a weekly or monthly basis, for any inaccuracies, thefts, fraud, etc. Except for those situations, the bank statements are of little value. I keep a few months worth but otherwise I shred and recycle them.

Bills – six months – The same rule applies for bills, check for errors, omissions, additions, or other irregularities as soon as you get them. These might also be useful because most places accept two utility bills as proof of residence. I keep a few months then shred the rest.

Pay Stubs – 1 year – Particularly useful to show income whenever you’re applying for a loan, these documents usually don’t have much value otherwise. Also, electronic versions might be around and you can almost always get your human resources department to print out old pay stubs or verify employment.


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