Financial Document Retention
February 10, 2012    Disclosures    POSTED IN  Personal FinanceEducation

The beginning of the New Year is a great time to organize and purge many of your financial files.  We are often asked which documents clients should keep and which they should shred. Below you will find some guidance.

Tax Returns

  • While there are exceptions, we recommend clients keep tax returns for at least 7 years, preferably in both paper and electronic form.
  • The IRS minimum is three years, but they can go back seven years if you claimed a loss from worthless securities.  Of course, if you did not file a return or if you filed a fraudulent return, there is no limit to how far back the IRS will expect you to produce records.
  • More details on tax recordkeeping requirements for individuals are available in IRS Publication 552.

IRA Contributions 

  • Any year that you make a nondeductible contribution to a traditional IRA, you must file Form 8606 to document those contributions.
  • Then hold on to all of those 8606 forms until you withdraw all the money from your IRA, so you have proof of these “after-tax” contributions when you start to take out the money in retirement. 

Investment Records

  • Keep your monthly statements until you receive and reconcile your year-end statement.  If your year-end statement is accurate, then you can toss the monthly statements.  Keep the year-end statements in your tax files.
  • You should keep records of your stock and fund purchases, for as long as you hold those investments.  When you ultimately sell the shares, you will need evidence of the price paid (your tax basis) and the date of purchase to settle up with the IRS.
  • Since 2011, brokerage firms are required to track the tax basis of new stock purchases for you, and beginning this year, mutual fund companies must do the same.  You are required to maintain record of all cost basis records before then.

Home Improvement

  • Keep receipts for major home improvements for at least three years after you sell your home.
  • You may want to show potential buyers how much you have spent to upgrade the property, and you may be able to use certain home-improvement expenses to lower any tax bill you might have on your home-sale profits.
  • It is unlikely you will have to pay taxes on the sale of your principal residence unless you have lived in it for less than two years, you rented out part of it, or your profit exceeded $250,000 (single), or $500,000 (married).

ATM Receipts and Bank-Deposit slips 

  • Shred your ATM receipts and bank-deposit slips as soon as you reconcile with your monthly statement.


  • Shred as soon as you receive and reconcile with your W-2 for the year.


  • Shred paper copies of your credit-card, utility, phone and cable bills as soon as the next month’s bill, acknowledging your last payment, arrives (unless you need to keep the bills for tax purposes – e.g. if you deduct home-office expenses).
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