When you want to get your financial records in order, you should start by organizing your most important papers, like receipts, tax records, and bank statements. But, how long should you keep financial records? If you aren’t sure what papers to keep, and for how long, here are some helpful tips.
Bank receipts and statements
Keep all of your receipts for deposits and withdrawals until you reconcile them with your monthly statement. After they are reconciled, shred and discard the receipts.
Keep your monthly statements for your checking and savings accounts if you need them for your taxes. After your taxes are filed, only keep those statements that correspond to deductions you took, and shred and discard the other statements.
You can throw away receipts for purchases unless you are keeping track of your spending, or you want to check the receipts against bank or credit card statements. However, if you think that you will be itemizing tax deductions on your income tax return, keep relevant receipts until you have filed your taxes. Remember to keep receipts for products that are under warranty, then discard when the warranty period ends.
Current year tax records
When in doubt, hang on to any documents or receipts that you might need for tax time. Find a safe place to store receipts and statements, and keep them organized.
Income tax returns and documents
Hanging on to your income tax returns is extremely important, since there is always the possibility of an audit. Keep your income tax returns and all supporting documents for at least seven years. Note that you can be randomly audited for up to three years after the date you file the return, and if the government suspects fraud, you can be audited at any time.
Credit card statements
Once you reconcile your receipts to your statement and make your payment, you can shred and discard your monthly credit card statements. If you are tracking your spending, hang on to your statements for a few months to discover trends in your purchasing habits and to see where you can cut back.
Keep all pay stubs until you receive your W-2. Reconcile your stubs to your W-2 then shred the stubs.