Now that most personal finance documents can be downloaded from the web whenever needed, do you really need to keep cumbersome paperwork on hand? Yes and no. In many cases, it’s smart to keep certain files on hand where they’re easily retrievable. What should you retain and how long should you keep personal finance documents? Here’s an overview of some of the most common documents found in most households and how long you need to keep them.
Taxes
Tax requirements can be confusing. There is a statute of limitations for documents that apply to income tax returns:
- At a minimum, keep tax backup records for 3 years.
- Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.
- Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
- Keep records for 6 years if you do not report income you should report, and it is more than 25% of the gross income shown on your return.
- Keep records indefinitely if you do not file a return.
- Keep records indefinitely if you file a fraudulent return. When it comes to keeping records relating to property, according to the IRS, you should keep records until at least a year after you dispose of the property for reasons of depreciation, amortization, or to figure out the gain or loss when you sell the property.
Car Insurance – How Long Should You Keep Personal Finance Documents?
Clearly, the most important document you need to keep about your car insurance policy is the actual physical proof of insurance (insurance card) and your policy agreement. Besides those documents, you’ll want to hang on to proof of payment, especially if you claim any deductions on your taxes. Plus, if you have any pending claims under a car insurance policy, don’t get rid of any papers regarding that policy until the claim is resolved.
Medical Bills and Health Insurance
It’s not necessary to hold onto your medical bills after you and/or your insurance company has paid the claim. The exception is if you’ll be claiming medical expenses on your taxes. Health insurance policy papers are like any policy documentation—keep them as long as the policy is in force and throw them away when you get a new policy.
According to the FTC, here’s the breakdown of how long to hold to your other documents:
- ATM, bank-deposit, and credit-card receipts should only be kept until you reconcile them with your monthly statements. One month should be enough and then shred them!
- Keep loan documents until the loan is paid off. That goes for car loans, as well.
- If you have investments in stocks, bonds, mutual funds or anything else, keep the investment purchase confirmations until you sell the investment.
- In the “keep forever” category are birth and death certificates, marriage licenses, divorce decrees, Social Security cards, life insurance policies and military discharge papers.
Rieva Lesonsky is an entrepreneur, best-selling author and self-educated health nut. Follow her @Rieva.
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