Retain Your Records No Longer Than You Must

[Barefootsies]

I guess I always thought it was 7 years. Time to lite up a fire.

I?ve long been a pack rat when it comes to saving financial documents. I have a file cabinet full of old cellphone and credit card bills, brokerage firm and bank account statements and health insurance benefit forms.

When my husband accused me of saving too much, I realized that there wasn?t much reasoning behind my record keeping. So I decided to find out what financial documents people needed to keep and in what form ? as we fully enter the age of electronic statements ? and what can be purged now.

According to Catherine M. Williams, vice president for financial literacy at the credit counseling firm Money Management International, there are two main reasons to keep financial records. ?It?s either for backup to a tax issue or for proof that you did something like make a payment,? Ms. Williams said.

The Internal Revenue Service requires that individuals be able to produce records proving any income, deductions or credit claimed for at least three years from the date of a return, the statute of limitations for how long the I.R.S. has to assess additional tax if all income was reported correctly. In addition, the I.R.S. requires that individuals be able to produce such records for six years if they fail to report income that is more than 25 percent of their gross income. There is no statute of limitation for failure to file or tax fraud.

Therefore, experts generally recommend keeping anything that verifies the information in your tax return for at least six to seven years. ?My recommendation would be never throw away copies of your tax returns and checks made out to the government ? anything else, I would say keep for at least six years,? said Jude Coard, a tax partner at accounting firm Berdon L.L.P.

Records that fall into this category include W-2 forms, 1099 forms, other tax reporting statements and end-of-year bank statements that show interest earned. As for brokerage statements, John W. Roth, a senior federal tax analyst with the tax information and software provider CCH, recommended keeping end-of-year statements as well as monthly statements and investment confirmation statements showing how much you paid for an investment and how much you earned for selling it. ?The only time when you need to save the monthly ones is if that is where the confirmation is for a purchase,? he said.

In fact, for any asset or investment for which you one day could claim a gain or loss (a home or stock, for example), you need to keep records of how much you paid for the item, the costs of any improvements you made to it and how much you sold it for. Such information needs to be kept for at least six to seven years after the gain or loss is included in a tax return.

You also need to keep proof of payment (like a credit card or bank account statement, canceled check or receipt) for any deduction or credit claimed, including for family gifts, tuition and charitable contributions. (See I.R.S. Publication 552 for a detailed rundown of the types of proof needed to verify various tax information.)

The other reason to keep financial records is for proof of a payment or other transactions. Unless you are self-employed and need copies of your bills to prove certain deductions on your tax form, you need to save bills for things like utilities and cellphone costs only until you?re sure your payment has been processed correctly. Throw such bills away once ?you?ve got the bill the next month and it shows a zero balance or payment received,? Ms. Williams said.

And unless you are self-employed and need years of monthly bank statements to prove your income, experts recommend keeping monthly bank statements for only a year, or for however long your bank allows you to challenge incorrect information like a double count for a debit purchase. The same guidance applies to credit card statements. If everything is correct, keep them for a couple of months or as long as the window for challenging charges is open. If there is a problem, keep the statements until it is resolved. (The time frame for notifying banks and credit card issuers of errors related to payments and transfers is generally 60 days after the error appears).

Documentation for insurance and loans would also fall into this second category. Ms. Williams recommended keeping any documentation related to loans, including the original loan document and statements, until you have paid off the loan. Once the loan is paid off, just keep documentation proving that you paid in full.

As for insurance, keep your paperwork for as long as you have the policy and keep documentation for any unresolved claims of coverage. For health insurance, keep any records (explanation-of-benefit forms, receipts and invoices) covering treatments that are in progress or that are not completely paid for or resolved. Such records should be kept until the treatment is completed, payment is complete and all coverage and payment issues ?are resolved to your satisfaction,? said Susan Pisano, spokeswoman for Americas Health Insurance Plans, who added that people might want to keep copies of such records even longer if they wanted a record of their own health treatment. If you have medical expenses that are tax-deductible, you would need to hold onto records related to them for six to seven years after the tax filing period.

There are documents one needs to keep indefinitely, including paperwork related to legal filings, wills, inheritance, bankruptcy and paperwork documenting contributions to and withdrawals from retirement accounts like Roth I.R.A.?s.

Continued...
http://www.nytimes.com/2010/03/25/yo...25RECORDS.html

[Si]

cliff notes:

use common sense when dealing with paperwork.

[Elli]

Originally Posted by Si

cliff notes:

use common sense when dealing with paperwork.

Nice translation

[Barefootsies]

Originally Posted by Si

cliff notes:

use common sense when dealing with paperwork.

[[ Nate ]]

Nice to know.

[Ladyboy King]

I had files on everything for many years. Then I lost it all due to a house fire. Then I was audited. The IRS did not care about my lost records and I had to pay 10s of 1000s of dollars to them for legit items that I should have been able to deduct.

That guy who flew his plan into the IRS building a month ago, is my hero. It's a shame he didn't take the entire building down. May the IRS rot in hell.

[fatfoo]

If you have a good memory, you don't need to keep any records for yourself.

You can just remember your financial statements date for date and dollar for dollar.

[woj]

Originally Posted by fatfoo

If you have a good memory, you don't need to keep any records for yourself.

You can just remember your financial statements date for date and dollar for dollar.

good luck with that

[GatorB]

Originally Posted by Ladyboy King

I had files on everything for many years. Then I lost it all due to a house fire. Then I was audited. The IRS did not care about my lost records and I had to pay 10s of 1000s of dollars to them for legit items that I should have been able to deduct.

That guy who flew his plan into the IRS building a month ago, is my hero. It's a shame he didn't take the entire building down. May the IRS rot in hell.

So you cheer a guy that killed an innocent person? WTF kind of asshole are you? Whose fault is it you failed to keep COPIES of such important documents? YOURS. If you felt these records were so damned imnortant you would have made copies then stored them ELSEWHERE. It's not the IRS's fault you were too lazy to do so.

[rob04]

From a business perspective holding records longer than necessary could be a risk/liability as well. Make sure you promptly destroy your records once you've passed your necessary retention period.

[CaptainHowdy]

Originally Posted by fatfoo

If you have a good memory, you don't need to keep any records for yourself.

You can just remember your financial statements date for date and dollar for dollar.

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