To get the best possible experience please use the latest version of Chrome, Firefox, Safari, or Microsoft Edge to view this website. The same is true when you buy, sell or insure something. The main reason for filing away financial documents is to be able to defend your annual tax returns if needed, but there are other reasons to save certain types of paperwork.
Some financial documents should be kept for the long term. The IRS statute of limitations for auditing is three years. State statutes of limitations can vary, so check with a tax professional on the limitations in your state. Your best bet is to hang on to your tax returns as long as possible.
You also should consider saving documents that verify the information on your returns for at least seven years, like W-2 and forms, receipts and payments. If you have receipts related to assets, like receipts for home remodeling projects, keep these for as long as you are the owner.
Documents that fall into this category include non-tax-related bank and credit card statements, investment statements, pay stubs and receipts for large purchases.
Keep these records on hand for a year if you need them to support your current-year tax preparation or as proof of income when making a large purchase. The Federal Trade Commission suggests holding on to your paid medical bills for a year before tossing them—unless you have an unresolved insurance dispute, in which case you would retain the medical bills until the dispute is resolved.
Medical bills are confusing, and having records on hand to dispute payments or errors is wise. Many banks and credit card issuers offer electronic statements now, so you may not need to keep paper copies on hand, which will cut down on excess clutter. If keeping other documents around longer term makes you anxious, you can opt to scan them to create electronic copies and then dispose of the original paper documents.
You can toss most monthly bills after you pay them, or after the payments have credited to your bank statement. If you end up needing to go back to verify anything, see if you can access past bills through online account access. Many companies keep past bills and invoices available online for the past few months or longer. Some canceled checks should be saved, though, if they are related to tax returns, like any charitable giving. Important papers to save forever include:.
This includes titles, deeds, insurance policies, warranty documentation and more. Health insurance policies and related documents are important to keep long term, too. So long as your health insurance is active, you should keep these records.
The same is true if you receive disability or unemployment benefits. Keep the documentation until you know you no longer need it. You can cut down on clutter by creating a reliable system for storing your financial documents. Keeping your documents safe is equally important. Whether you have paper documents or electronic versions, here are options for storing your financial documents safely long term.
Many people choose to keep documents stored in a filing cabinet. Use file folders to organize paperwork by subject, year or another method of your choice. Bankers boxes are another storage option, but these are more susceptible to water damage. Likewise, if you own a vacation home or invest in real estate rental properties , you should keep these same documents for all the properties you own in addition to your main home.
Another useful document to keep is your quarterly property tax bill. Another document you need to keep — and make sure to keep in a safe place — is the title to your home. This document is your legal proof that you own the property. Keep the title to your home until you sell it. Do the same for the title to your car if you have one. Keep this document as long as you live in the home so that you can refer to it if you have any disputes with your landlord.
After that, you can shred it. Some of the most important papers you own are the ones that document the important events in your life. Depending on how your life story has gone, these could include any of the following:. Keep these documents forever, and keep them in a secure place, such as a safe deposit box. You can refer to it if you suspect anything is missing.
Keep this list as long as you have the box. There are two main ways to store your documents: on paper or in digital form. Paper documents fall into several different categories. Credit card receipts, ATM receipts, and bank deposit slips all need to be stored for less than a month. You can stash these in an envelope or pin them on a receipt stand. At the end of the month, you can check them all against your credit card or bank statement and then dispose of them. Next, some documents — such as quarterly investment reports and insurance forms — need to be kept for a year or less.
A handy way to store these is in a filing cabinet or hanging file crate with a separate folder for each category: home, car, financial, and so on. Finally, there are documents you need to store over the long term, such as tax returns and property records. Storing your long-term documents in a file cabinet, along with your short-term ones, makes it easy to find them when you need them.
And if you choose a file cabinet with a lock, it keeps your sensitive personal information away from prying eyes. By contrast, storing your documents in a fireproof safe protects them from damage and theft, but it makes them harder to access. Small business expert Barbara Weltman, speaking with Consumer Reports, recommends choosing a fireproof safe for documents that are especially sensitive: bank and investment statements, tax documents, estate-planning documents, and pension information.
Because these documents contain personal information, such as your Social Security number, leaving them where others could find them puts you at risk for identity theft. Experts also suggest making a list of all your most important accounts and stashing it in your safe for reference. Keeping your financial documents in digital form can be easier than storing physical documents.
However, electronic files are vulnerable to other threats, such as computer viruses and hacking. Experts disagree over where you should keep vital personal records such as birth certificates, passports, wills, and the titles to your home and car. Weltman recommends putting these documents in a safe deposit box at a bank, but other experts point out that doing so will only allow you to access the documents during bank hours. Also, if you die, your safety deposit box could be sealed, making it hard for your heirs to retrieve the contents.
These experts say a fireproof safe is the best place for these vital documents. Perhaps the safest option of all is to make backup copies of your most important documents, such as birth and marriage certificates.
That will allow you to keep one in a safe deposit box and one in your fireproof safe at home. If you just toss documents with sensitive personal information into the trash or recycling bin, thieves can fish them out of your bin at the curb and use them to hack into your accounts.
To avoid this problem, invest in a small shredder for your home office. Your tax returns are important documents to keep as part of your financial history.
You can easily access your paperless statements and documents online and keep them safely stored there. Bank of America clients can easily manage paperless statements and documents using Mobile and Online banking. Depending on your filing circumstances, the IRS may be able to ask you for supporting documentation for three to seven years after you file a return.
Knowing that, a good rule of thumb is to save any document that verifies information on your tax return—including Forms W—2 and , bank and brokerage statements, tuition payments and charitable donation receipts—for three to seven years.
You should also hold on to pay stubs so that you can use them to verify the accuracy of your Form W-2 when tax season arrives. Otherwise, you can dispose of them as soon as you verify your payment was processed. You can also dispose of bank withdrawal and deposit slips after verifying them with your monthly statement. For physical documents, designate a safe, out-of-the-way place in your home to store all paper records that protects them from damage or theft.
For digital records, be sure to archive and back up all electronic records. Use complex passwords to keep your account information safe.
Make sure your username and password combination is different from the ones you use for personal email, online merchants and social media accounts. Protecting your computer with antivirus software is also a good idea. Invest in a cross-cut shredder that will eliminate all traces of your personal information, or search for free shredding events in your community.
Having paperless statements and documents can help reduce the risk of identity theft posed by lost or stolen mail. The material provided on this website is for informational use only and is not intended for financial, tax or investment advice.
Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional and tax advisor when making decisions regarding your financial situation. We're here to help. Reach out by visiting our Contact page or schedule an appointment today. We strive to provide you with information about products and services you might find interesting and useful.
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