Maintain an average household for very long and you’ll soon feel as if you’re drowning in paperwork. From utility bills and credit card statements to check stubs and tax returns, your home is filled with important financial records. While it’s important to keep some records to verify income and tax deductions, you don’t need to store them forever. You can safely discard some records and keep only the most essential documents filed away.
You can safely shred your bank statements after one year, unless you need them to support tax deductions. Keep canceled checks or copies of canceled checks that verify deductions, the purchase of items for your home (to prove an insurance claim), business expenses and home improvements. Periodically cull these records and shred those that pertain to items you no longer own.
The IRS has three years in which to audit your return, but the agency may challenge a return up to six years after you file if the IRS suspects you under-reported income. Keep your tax returns and all supporting documentation for at least seven years.
Bills and Credit Card Statements
Bills for big-ticket items in your home such as electronics and furniture can provide proof if you need to make an insurance claim or help you prove an item is still under warranty, so hang onto these until you no longer own the item. You can discard utility bills after you pay them, unless you claim a deduction for an office in your home and deduct part of these expenses. In this case, keep the bills with your tax returns as supporting documents. Shred your credit card statement as soon as you pay the bill, unless the statement shows purchases of items for a business, medical bills you deducted from your taxes, or big-ticket home items. You can safely discard the tax-related items after seven years.
Keep your pay stubs until you receive your W-2 at the end of the year. Match the stubs to your W-2 and if everything matches up, shred the pay stubs. If you’re self-employed, keep payment receipts until you receive a 1099 from the payor. Or keep all these proofs of income with your tax return and discard after seven years.
Keep the monthly or quarterly statements from your retirement accounts until you receive your annual statement at the end of the year. Compare statements to make sure everything is in order, and if they are, shred the quarterlies and keep the year-end summary until you close the account.
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