Financial Records: What to Toss and When

Thursday, April 11 at 09:20 AM
Category: Arvest News

Bank statements, credit card bills, canceled checks and other documents can be useful for tax purposes as proof of a transaction or payment, or for other reasons. But how long should you keep them? There is no hard and fast rule as to when it's safe to throw away financial documents. However, one thing to remember is federal tax rules require you to have receipts and other records that support items on your tax return for as long as the IRS can assess you additional tax.

Basically, the IRS has about six years to assess additional tax if you underreported your income by more than 25 percent. Many tax advisors recommend holding all tax records for about seven years allowing extra time for any unforeseen delays that may have occurred in processing your return. With tax considerations in mind, here are suggestions that may make sense for many people.

Credit card and bank account statements: Save those with no tax return usefulness for about a year, but those with tax significance should be saved for seven years.

Everyday living: Those unrelated to anything you claim on your income tax form, and not needed to prove you've paid a bill or debt, probably can be destroyed after you've verified your bank statement is correct. However, canceled checks that support your tax returns, such as charitable contributions or tax payments, probably should be held for seven years.

Also, you may want to indefinitely keep any canceled checks, receipts or/and documents for a home purchase/sale, renovations or other improvements to a property you own. However, once a home has been sold and another seven years has passed, checks related to renovations or improvements can be destroyed.

Arvest and many other financial institutions no longer return the actual cancelled checks. If you do not get cancelled checks with your statements, then you may be able to request electronic or paper copies with an electronic or paper statement. If you receive your checks electronically, then you may wish to print the check images and save them for up to seven years for your records.

Also, if you keep records electronically, then be sure to back up your data. You can store it in various ways (on CDs, flash drive, etc.), but as old technology is no longer supported you will need to transfer your old data to new media. Another option is to research different companies that provide backup storage online, either free or for a small charge. Be sure to keep the virus protection on your computer up-to-date to help ensure the security of your information.

Deposit, ATM, credit card and debit card receipts: Save them until the transaction appears on your statement, and you've verified the information is accurate. Exceptions would be receipts for expensive items. If they are under warranty or you have to file an insurance claim, then those receipts may come in handy.

Finally, before tossing away any document with a social security number, bank account number or other personal information (especially financial information), shred it to avoid becoming a victim of identity theft.

The views of this article are for general information use only. Please contact and speak with a tax advisor when specific tax advice is needed.

Tags: Consumer Protection, Financial Education
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