How Long to Keep Important Documents

Author: David Duran, Branch Manager 01/13/2023

In preparation for tax season, you may want to start compiling your important documents now. Filing your tax returns is a much smoother process when you have the right documentation on hand. If going through all your files and financial records sounds like a daunting task, it might be time to dispose of old records. Which documents should you keep? And for how long? In this article, we will walk through the types of documents you want to hold on to and how to safely store them.

Major Documents and Financial Records (Keep Forever)

There are certain documents that you should hold on to forever. These include your major life records, such as a birth certificate, social security card, death certificate of a family member or loved one, marriage certificates, and divorce decrees. Documentation of your identity is usually requested when you start a new job, open a bank account, or apply for retirement benefits so your records should be readily available.

Both personal and business tax returns should be kept forever. Older tax returns can be safely stored away with your other major documents. But your recent tax filings should always be easily accessible for you to reference. In the event that your business receives an audit, you may need to provide tax records from the past three years.

Supporting Tax Documents (Keep 3-7 Years)

Any supplemental financial records that you might report to the IRS should be stored alongside your corresponding tax returns. The golden rule for these supporting documents is to keep them for three to seven years. These are records that verify the information on your tax returns. For businesses, supporting tax documents might include invoices, receipts, deposit slips, and payroll records. For individuals, supporting documents might include W-2 forms, charitable donation receipts, and tuition payments.

Bank/Credit Card Statements and Pay Stubs (Keep 1 Year)

You should keep monthly statements and pay stubs for a year. Many bank accounts and employers will provide your statements or employee pay stubs electronically. You can usually find past statements by logging into your bank or credit card account. But for many people, receiving paper statements and pay stubs in the mail is their preferred option. Whether you go with electronic or paper, you should review these documents when you receive them to verify that all the information is correct. You should review them again when you are filing your tax returns. But once these documents have been reconciled with your monthly earnings and spending, you can safely dispose of them.

Utility Bills/Deposit and Withdrawal Records (Keep 1 Month)

Hold on to deposit and withdrawal slips for up to one month. Make sure that every transaction shows up in your bank account exactly as it does on your receipts. Cross-reference your transaction records with your monthly statements and once you have verified the information is accurate, you can discard them. Similarly, utility bills only need to be kept long enough for you to verify the charges on your bank account and bank statements. If you own a business, you will want to hold on to your utility bills for longer—up to a year—for tax purposes.

How to Safely Store These Documents

Paper documents should be stored in a safety deposit box at your bank or a secure, fireproof box at home. The advantage of using a safety deposit box is that they are built to withstand natural elements such as water and fire. Your important documents can only be accessed by you, and the bank will verify your information before giving access. A more affordable and convenient option is keeping a fireproof box at home for your paper records.

You can reduce clutter and free up storage space by converting your files from paper to electronic. Make clean scans of the document and make sure no information is cut off. Then securely dispose of the hard copy. For documents that should never be tossed out (birth certificate, social security), it can be useful to have an electronic copy. When storing files electronically, the folder should be encrypted and password protected. Be careful when giving someone else access or permissions to view or edit these files and review those access settings regularly. If you are a business owner, your personal and business files should be kept separate but equally secure.

How to Properly Dispose of These Documents

The most effective and recommended way to dispose of your important documents and financial records is shredding. There are several options for finding a place to shred documents: libraries, UPS stores, your place of employment. Find out if your local community hosts “shred days” or if there are places near you to drop off boxes of paper for shredding. Of course, you can also invest in your own paper shredder to dispose of your documents at home. Companies that handle lots of documents with sensitive internal and client information should have a regular shred schedule. If your files are electronic but you want something more secure than hitting “Delete”, some cybersecurity software programs will digitally “shred” your files.

Whether you are old school, digital, or somewhere in between, the benefit of putting time and effort into your record keeping cannot be understated. Proper storage and disposal of your personal, financial, and business documents is a great way to protect your identity, your finances, and your peace of mind. To learn more about keeping your personal and financial information safe, visit PlainsCapital.com

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