When to Ditch Old Paperwork

Tax season is in full swing, and if you’re anything like me, your desk (or
kitchen counter, or floor) is awash with bank and credit card statements and
financial documents. And let’s not mention my file cabinet, which is full of old
utility bills, social security mailings and random 401(k) statements.

Have you ever wondered how much of your paperwork you actually need to keep,
and for how long?

Here’s a quick guide:

Tax returns (state and federal): The IRS recommends keeping your filed returns forever, but you need only keep most supporting documentation for three years. That includes receipts for charitable contributions, mortgage interest
and business expenses. If you use credit card statements or canceled checks to
back up tax filings, keep those, too. (Note: Under certain circumstances,
you should keep records for longer. See the IRS’s
page for details.)

Credit card statements: One year

Bank statements: One year

Canceled checks: One year

Pay stubs: Until you get your W2, so you can compare numbers and
request a correction, if necessary.

Receipts: Until the warranty expires on the item you bought, unless
it’s a sizable purchase, such as furniture or an antique. Those should be kept
for insurance proof-of-value purposes.

401(k) statements: Until you get the next one.

Social security statements: Until you get the next one.

House records: Keep the records on home improvements and renovations
you’ve made, as well as the expenses you incur when you buy and sell a property
(legal fees, realtor’s commission). These are added to the original purchase
price of your house when you sell it, reducing your capital gains tax on any
profit.

Insurance policies: Keep renewable policies (car, home) until you get
the new policy (upon renewal). Keep permanent life insurance policies forever,
and term life insurance policies until the term expires.

Brokerage statements: Keep until you sell those securities, and then
hang on them (with your tax return) for seven years.

As you’re throwing out all the paperwork you don’t need to keep, don’t
forget to shred anything with sensitive information on it.

Are you organized about your paperwork (and how long you keep it), or do you
just stuff everything into a drawer?