Mar 05, 2024 Personal Finances,
Determining whether to keep or shred bank statements and financial documents can be confusing – use our simple guide to get started.
Every year, it’s nice to do a bit of “financial spring cleaning” and declutter your filing cabinet, desk drawers, and the various hiding places where miscellaneous scraps of paper tend to accumulate and multiply. Here’s what you need to know:
Keep Or Toss
Keep Forever
If you’re long overdue for some organization in the paperwork department, start here! This category includes all the super important life stuff that’s usually issued to you only once and therefore difficult to replace:
- Birth and death certificates
- Social Security cards and ID cards (even expired versions)
- Passports (even expired versions)
- Marriage licenses and divorce decrees
- Adoption papers
- Copies of wills, trusts, and powers of attorney
- Adoption papers
- Records of paid mortgages
- Safe-deposit box inventory
- Military records
- Retirement and pension plans
Your “keep forever” documents should be kept in a secure place. A locking file cabinet in your home is a popular choice but consider upgrading to a safer alternative – such as a fireproof safe in your home or a safe-deposit box at your credit union or bank. Also, consider scanning these documents and having them backed up on the cloud – password protected, of course – so you can access them remotely and quickly in an emergency.
Keep For Seven Years
- Income tax returns
- Any forms that support income or a deduction on your tax return (e.g., receipts, canceled checks, W-2 forms)
- Records of selling a house or stock (documentation for capital gains tax)
- Records of paid-out loans
- Records of sold investments
- Mortgage documents
- Medical records (including prescriptions and health insurance information)
This category includes all supporting documents for your income tax return, plus a couple of other miscellaneous ones. This may seem like a long period of time, but it’s not an arbitrary number – seven years is how far back the IRS can go to audit a tax return. The breakdown is a little more complex; you can be audited for any reason up to three years after you file a tax return and up to six years after you file a tax return if you omitted 25% or more of your gross income – which technically makes the auditing window three to seven years.
An audit is an evaluation of your tax return to verify its accuracy and to ensure compliance with tax laws. Many people associate being audited with having committed tax fraud or some other dishonest financial behavior, but, in fact, some taxpayers are audited on a random basis each year.
If audited, you’re required by law to provide the documentation that supports the claims made in your tax return. In some cases, additional information may be required to verify a claim you’ve made – it might just be a matter of providing a canceled check, a receipt, or a bank statement. In other instances, the audit may take place on-site, meaning at your residence or workplace, or at an IRS office. Being well-organized is the best way to make the process as quick and painless as possible.
Keep For One Year
- Bank and credit card statements
- Pay stubs
- Quarterly investment statements
- Receipts for large purchases
- Canceled checks
- Paid medical bills
This category mostly consists of monthly statements. A good rule of thumb is to keep your monthly statements for the current year, and then shred them once you’ve reconciled them with an annual statement. The exception is any statement needed for tax purposes – those get grouped into the “keep for seven years” category.
Keep For 30 Days Or Less
- ATM slips
- Utility and phone bills
ATM slips can be tossed once you’ve checked them against your monthly bank statement. Utility bills and phone bills can be shredded after you’ve paid them unless they contain tax-deductible expenses.
Keep While You Own
This bonus category is a catch-all for agreements and contracts that are active for varied amounts of time:
- Warranty information
- Insurance documents
- Vehicle titles and loan documents
- House and mortgage documents
- Pension records/retirement plans
You’ll want to hang on to the records in this category for at least as long as you own the asset. For major purchases, stapling the original purchase receipt to the user manual or warranty information will keep everything in the same spot, should you need to make a warranty claim. Documents relating to improvements and upgrades on your home or vehicle should also be saved alongside your title and loan papers.
Summary
Sorting through financial documents is a straightforward process once you figure out how long you need to keep specific types of documents. Doing a periodic cleanup will help keep your documents organized and decluttered in the event you need to access them.
FAQs
For Tax Purposes:
How long should you keep copies of bank statements? ›
Most financial experts say you should keep your bank statements in either digital or hard copy for at least one year. Once they've been in the filing cabinet (or your computer hard drive) for one year, you can finally shred the paper or press the delete button.
Is it worth keeping old bank statements? ›
KEEP 3 TO 7 YEARS
Knowing that, a good rule of thumb is to save any document that verifies information on your tax return—including Forms W-2 and 1099, bank and brokerage statements, tuition payments and charitable donation receipts—for three to seven years.
Is it safe to throw away old bank statements? ›
Bank statements and canceled checks. Even if they're old statements, they should be shredded. Your name, address, phone number, and bank account information are in those statements, along with your habits, purchases, and banking history. Even if the account is closed, shred it anyway.
Is there any reason to keep old bills? ›
If you have items you're deducting on your tax return, such as medical expenses, purchases, utility bills, and other expenditures, you'll want to hang on to those important papers.
Do I need to keep old checkbook registers? ›
Checkbook Registers: Up to 10 Years
“Not only are they the story of a year, but if you use them regularly, it's a reference for expensive purchases or services that you didn't keep receipts for.” (Plus, these are records that do not exist digitally, meaning you need to keep them longer.)
How many years of financial statements should I keep? ›
Keep For Seven Years
This may seem like a long period of time, but it's not an arbitrary number – seven years is how far back the IRS can go to audit a tax return.
How long should I keep my credit card statements? ›
Credit Card Statements: Keep them for 60 days unless they include tax-related expenses. In these cases, keep them for at least three years. Pay Stubs: Match them to your W-2 once a year and then shred them. Utility Bills: Hold on to them for a maximum of one year.
How long should you keep monthly statements and bills? ›
One Year. Documents that fall into this category include non-tax-related bank and credit card statements, investment statements, pay stubs and receipts for large purchases.
What documents to keep and for how long? ›
How Long to Keep Important Documents
- Major Documents and Financial Records (Keep Forever) ...
- Supporting Tax Documents (Keep 3-7 Years) ...
- Bank/Credit Card Statements and Pay Stubs (Keep 1 Year) ...
- Utility Bills/Deposit and Withdrawal Records (Keep 1 Month) ...
- How to Safely Store These Documents.
Cutting up confidential documents with scissors or tearing them by hand is a cheap and easy way to destroy important papers without a shredder. You can also use a hole punch to make printed words and numbers unreadable, such as bank account numbers and addresses.
Should I shred everything with my name and address? ›
To protect your privacy, you should also consider shredding items that include: Names. Addresses. Phone numbers.
How far back can bank statements go? ›
Beyond those minimums, banks will often keep records of closed accounts for 7-10 years after closure. This allows them to reference for any potential issues. After about 10 years, banks usually archive the records offline or to microfilm/digital storage.
How long should I keep my bank statements? ›
For Tax Purposes: You should keep your statements for at least 3 to 7 years. The IRS typically has 3 years to audit after you file taxes, but accountants and bookkeepers often recommend keeping 6 to 7 years of statements to be safe.
How long should you keep canceled checks? ›
"There are things that we should keep for seven years like tax returns, your deductions, records of things that you've sold mortgage documents, medical records. There's things you should just keep for one year - like bank statements, pay stubs, quarterly investment statements, canceled checks," Noceti said.
How long to keep retirement account statements? ›
How long should you keep plan records? You should keep retirement plan records until the trust or IRA has paid all benefits and enough time has passed that the plan won't be audited. Retirement plans are designed to be long-term programs for participants to accumulate and receive benefits at retirement.
How long should you keep checking duplicates? ›
(In general, banks that do not return original checks to customers are required to keep copies of checks for seven years.) Also, if you keep records electronically, be sure to back up your data.
How do you destroy old bank statements? ›
Shredding is a common way to destroy paper documents and is usually quick, easy and cost-effective. Many retailers sell shredders for use within your office or premises, enabling you to shred and dispose of the documents yourself.
Do I need to keep credit card statements for 7 years? ›
Three to six years for personal tax deductions.
According to the IRS, it generally audits returns filed within the past three years. It usually doesn't go back more than the past six years. So it can be a good idea to keep any credit card statements with proof of deductions for six years after you file your tax return.
How many years worth of bank statements can I get? ›
Banks do keep records typically going back 7 years, though bank policies vary.. Twenty years back would be unusual. Statements are kept digitally or on microfilm or microfiche, with the latter forms taking longer to retrieve.
