It’s time for Spring Cleaning, and for many of us, that means a deep cleaning of our home, clearing out closets, and making trips to Goodwill. There is another thing that needs to be cleaned out, and that is your financial records. Here are some record retention guidelines to assist you:
1-3 Years
- Household Bills
- Expired Insurance Policies
6-7 Years
- Tax Returns and supporting information
- Income and expense records
- Bank Statements
- Brokerage/Investment account statements
- Paid off Loan documents
- Personal property sales receipts
Indefinitely
- Tax Dispute Records
- Medical history Information
- Social Security Information
- Pension Plan documents
The IRS typically has three years after a return is filed to audit a return or two years after you’ve paid the tax, whichever is later. However, if income was underreported by at least 25 percent, the IRS can look back six years after the return is filed, and there is no time limit for fraudulent tax returns.
Lastly, we cannot conclude this discussion on record retention without emphasizing the importance of retaining electronic records. More than ever, essential documents and statements are available via email and secure file download. Setting up an electronic file system on your personal computer is crucial to ensuring your important files are safely stored and backed up regularly.