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Spring Clean Your Financial Records: What to Toss & When

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Adapted from the article originally published by the FDIC, available at http://1.usa.gov/Zno8L3

 

Tax season is wrapping up. Now, you’re left with a refund (if you’re lucky) and piles of documents you’re unsure what to do with.

 

Documents such as bank statements, W2s, credit card bills, canceled checks, investment information and other records are useful for tax preparation. But how long should you keep them after you’ve filed?
Here are some general guidelines from the FDIC:

 

Bank account and credit card statements: Keep statements with no tax significance for about a year, then shred. Anything you’ve used to prepare your taxes should be saved for seven years.

 

Canceled checks: Unless used to prepare your taxes or to show you've paid a bill or debt, most canceled checks can be destroyed after you've verified that your bank statement is correct. But canceled checks that support your tax returns, such as charitable contributions or tax payments, should be held for seven years. 

 

One exception to the seven year rule: property. Any canceled checks, along with related documents, used during the purchase, sale or renovations of a home should be kept indefinitely. Once the home has been sold, and another seven years have passed, checks related to renovations can be shredded.

 

Receipts for deposited funds and/or ATM, debit and credit card transactions: Save them until the transaction appears on your statement and you've verified that the information is accurate. Once you know the transaction was processed correctly, go ahead and shred the receipts. You might want to make an exception for the receipts of expensive purchases and those under warranty.

 

Electronic Documents: It is now easier than ever to store financial records with CDs, flash drives, back-up hard drives and cloud-based services. But be sure to keep your storage system up-to-date. As old technology is no longer supported, you will need to transfer your files to new media. A great long-term solution: use a service that provides backup storage online. Many companies do this either free or for a small charge.

 

Always, shred any document that contains a Social Security number, bank account number or other personally identifying (especially financial) information, to avoid becoming a victim of identity theft.

 

Remember, for up to 6 years after you file the IRS can assess additional tax if you underreported your income by more than 25 percent. This is why many tax advisors recommend holding all tax records for seven years. If the IRS suspects fraud however, the amount of time is unlimited.

 

For additional guidance on how long to keep your financial records, ask a trusted financial advisor. To read the article originally published by the FDIC, go to http://1.usa.gov/Zno8L3

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