|Consumer Tips |
|Consumer Tips from Your Community Banker
How Long to Keep Financial Records?
If paper decluttering was one of your New Year's goals, you may be wondering which financial documents you can safely shred. While some documents need only be kept for a few months, others should be kept for several years, or in some cases indefinitely.
The length of time varies according to the reasons you might need the documents in the future. You might need older W2 forms to answer a tax question from the Internal Revenue Service or Wisconsin Department of Revenue. Documentation of home or property maintenance costs might be useful when you decide to sell your property, and utility records might be helpful when deciding to upgrade your furnace.
The IRS has three years to audit your tax return, and you have three years to file an amended return. Still, the IRS can challenge your return for up to six years, so it's a good idea to keep these records for seven years:
• W-2 and 1099 income forms
• Year-end bank and brokerage statements
• Receipts or cancelled checks for deducted expenses
• Home purchase or closing statements, insurance records, and receipts for improvements
Home ownership is a special case and homeowners should keep these records for six years after selling their home. They should also retain records of legal fees and commissions related to selling their home. These expenses are added to the original purchase price or cost basis and can lower their capital gains tax.
On the other hand, some documents need to be kept for only a few months. There's no need to hold onto most canceled checks (or their electronic copies) or debit and credit card receipts for more than three months after you've reconciled them with your statements. If, however, the purchase will be reported as an itemized deduction on your income tax return, keep this documentation for seven years.
And there's no need to keep monthly loan statements once you have received a year-end summary, but always keep final payoff notices in case the loan mistakenly goes into collection and you need proof.
Still, there's no getting around it: some records should be kept indefinitely, for example:
• Records of IRA contributions (particularly nondeductible contributions)
• Annual summaries of retirement/savings plan statements
• Copies of your tax returns
• Receipts for big purchases - jewelry, rugs, appliances, antiques, cars, collectibles, furniture, computers - as proof of their value in the event of loss
To reduce paper clutter, you can scan your records and save them as PDF files. (Be sure to back them up!) And before tossing any document that contains a Social Security number or bank account number, shred it to deter identity theft.
• Wisconsin Department of Revenue: www.revenue.wi.gov/faqs/pcs/keeprec.html
• Wisconsin State Treasury: http://wistatetreasury.wordpress.com/2012/10/15/money-matter-what-personal-financial-records-should-you-keep/
• FDIC: https://www.fdic.gov/consumers/consumer/news/cnwin1011/finrecords.html