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Personal Recordkeeping and Record Retention

Updated: Sep 23, 2019

How Long to Keep Tax and Other Records

Tax season is the perfect time to cull your paper and computer files and get everything in order. At tax time, it's important to keep track of the tax documents you're expecting to arrive just to make sure you actually get them.

It's also a good idea to keep them well-organized. TMA suggests you start a folder labeled, 20xx Tax Documents. Keep a close eye on the paper and electronic mail. Separate any envelopes with the words "tax information" or "tax documents" and put them immediately in your folder. Print tax documents you've been sent electronically and put those in your folder also.

Even if you've already filed your taxes, creating an organizational system could benefit you if you're audited. It will also make life easier when you have to do taxes again next year.

It's Not Just About Taxes

While you're focused on your tax papers, it's a good idea to organize all your financial documents.

For instance, you may need taxes and brokerage financial statements from previous years if you're meeting with a financial adviser. If your home is hit by a fire or flood, or a thief pays a visit, you may need quick access to your insurance papers. If you become ill, your loved ones may need to find papers that prove they can look after you, such as your healthcare proxy.

While the process may be daunting, getting your papers organized now means you can purge unneeded documents and simplify your life.

How to Organize Your Records

Start by dividing your financial papers into four categories.

  1. Keep for less than a year. In this file, store your ATM, bank-deposit, and credit card receipts until you reconcile them with your monthly statements. Once you've done that, shred the paper documents or securely trash electronic files unless you need them to obtain a refund or support your tax return or an insurance claim. Keep insurance policies and investment statements until new ones arrive.

  2. Keep for a year or longer. Hold on to loan documents until the loan is paid off. That will often be for more than a year. If you own a car, hold on to the title until you sell it. If you have investments in stocks, bonds, and mutual funds, for example, keep the purchase confirmations until you sell, so you can establish your cost basis and holding period.

  3. Keep for seven years. If you fail to report all of your gross income on your tax returns, the government has six years to collect the tax or start legal proceedings. To be on the safe side, keep all tax records for at least seven years.

  4. Keep forever. Records such as birth and death certificates, marriage licenses, divorce decrees, Social Security cards, and military discharge papers should be kept indefinitely. Also, hold on to any defined-benefit plan documents, estate-planning documents, life-insurance policies, and an inventory of what's inside your bank safe deposit box.

How to Store your Files

There are many ways to store important documents. It's a good idea to use a fireproof safe or password-protected electronic file for documents such as bank and investment statements, estate-planning documents, pension information, pay stubs, and tax documents.

You may want to invest in a safe deposit box for papers that can't be easily replaced. These include original birth and death certificates, Social Security cards, passports, life-insurance documents, and marriage and divorce degrees.

For electronic files, consider backing them up to the cloud only if the storage provider uses encryption technology. You can also store copies of your files in folders on an external hard drive that is password-protected.


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