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How Long Should I Keep Financial Records?

Receipts seem to multiply like rabbits, don’t they? And whether they’re in a sophisticated filing system or just a shoe box under the bed, eventually they need to be purged. But what should you keep and for how long? Here are some guidelines.

Type of Record Keep It How Long? The Reason...
Tax returns 7 years Because the IRS has up to 6 years from your filing date to audit your return, better hold onto everything for at least that long.
Bank statements and check images 12 months or longer Shred most after a year, but keep those related to taxes and business expenses for at least 7 years and those related to a home purchase or improvements indefinitely.
Bills, like utilities and other services 12 months to 7 years Generally, you can shred the bills after a year. But if you’re deducting the cost of the service as a business expense for tax purposes, keep the bill for 7 years with your tax return.
Credit/debit card receipts and statements 45 days or longer Check receipts against your monthly statement. If they agree, shred the receipts. But keep your statements for a year, or up to 7 years if tax-related expenses are included. Keep those for major purchases for as long as you have the item to prove its value if it’s lost or stolen.
Paycheck stubs/W-2s 12 months to permanently When you receive your W-2 from your employer, and have confirmed that it’s correct, shred the stubs. Keep the W-2s permanently.
Retirement savings plan statements 12 months or longer Keep monthly or quarterly statements from your 401(k) or IRA until you receive the annual summary. Then shred the monthlies or quarterlies. But keep the annual summaries until you retire or close the account.
House records 6 years to permanently Keep all records documenting the purchase price and costs of all major, permanent improvements indefinitely. Keep records of expenses incurred in selling and buying the property for 6 years after the transaction.

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