How Long Do I Need to Keep My Year End Statements for Stock & Mutual Funds?

Year-end stock and mutual fund statements contain tax-related information.
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People who own stock and mutual fund investments receive a year-end statement from their stockbroker containing information that they may need to report on their tax return. The IRS requires taxpayers to hold on to their tax returns and supporting documentation for a certain period of time. The length of time of safekeeping varies depending on the type of document. Brokerage statements must be retained until the securities are sold; the record of investment purchase and subsequent sale will determine if the sale resulted in capital gains or losses.

IRS Requirements

The IRS has certain timelines that allow the federal agency to audit taxpayers for a variety of errors that can be found on a tax return. Good-faith tax errors can be audited up to three years after the tax return is filed. The IRS has up to six years to audit tax returns that under-reported income by 25 percent or more. If you failed to file a tax return or filed a fraudulent return, there is no time limit and you can be audited at any time. Based on your situation and the accuracy of your tax returns, you must keep your tax returns and all supporting documentation for a minimum of three years.

Investment Records

Your stocks and mutual fund transactions can trigger events that need to be disclosed on your tax return. Your investment activity will be documented on the periodic statements you receive from your brokerage firm, typically at year-end. So, your year-end statements that show the investment activity in your brokerage account are part of the supporting documentation of amounts that are disclosed on your tax return.

Gain on Investment Sale

All capital gains on sales of investments must be reported on your tax return. For example, a sale of stock in excess of its purchase price will trigger a capital gain that will need to be disclosed on your tax return. The capital gain amount can be affected by capital losses incurred or mutual fund expense amounts. Certain amounts disclosed on your year-end statement can be carried over to your tax return, while others may be part of a calculation that will affect capital gains earned.

Loss on Investment Sale

All capital losses on sales of investments should be reported as a reduction to any capital gains earned. If a sale of stock occurred for less than its purchase price, a capital loss will result that can be used to offset capital gains. Mutual funds also incur expenses that are reported on your tax return; these amounts are typically carried over and, depending on your tax situation, may affect your capital gain or loss. Your year-end statement will provide all loss and expense amounts that need to be disclosed.

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