Financial Documents to Keep and Shred

The IRS requires taxpayers to document most claimed sources of income, losses and deductions. This can create confusion over which financial documents need to be kept and which can be destroyed.

The Internal Revenue Service (IRS) requires taxpayers to document most claimed sources of income, losses and deductions.

This can create confusion over which financial documents need to be kept and which can be destroyed.

The Certified Financial Planner (CFP) Board of Standards listed the documents to keep and those to dispose of. We added a few of our own suggestions to the CFP Board’s list.

Tax Returns and Supporting Documents: The IRS generally has three years to commence an audit, but it can look further back. For this reason, it is prudent to keep returns and all supporting documents for seven years. If tax software or a website was used to fill out and file the return, see about getting a PDF copy of the return and all supporting documents.
Medical Bills and Records: If the medical deduction is claimed, keep all documents, including any records relating to mileage and lodging for seven years. The CFP Board also suggests keeping medical records for at least a year in case there is a problem with receiving insurance benefits.
Bank Statements: As a general rule, these statements can be disposed of after a period of one year, sooner if the bank provides electronic access to an archive of them. Hold onto statements and/or cancelled checks documenting tax-related transactions (including charitable donations over $500) and/or major purchases. If there is a possibility of applying for Medicaid, your state may require five years’ worth of statements. Download any needed electronic statements if you change banks.
Brokerage and Mutual Fund Statements: Hold onto to any statements showing the purchase price and date for stocks bought before 2011; mutual fund, exchange-traded fund (ETF) or dividend reinvestment plan (DRP) shares bought before 2012; and traditional bonds bought before 2014 in a taxable account. Also, keep records of any Roth IRA contributions made within the past five years.
Credit Card Bills: Paper statements can generally be disposed of after 45 days unless they document a tax-related transaction or a major purchase.

(Note: When disposing of documents, use a cross-cut paper shredder to dispose of any document containing your Social Security number, account numbers, signature and other personal identification information beyond just your address.)

Source: “Financial Documents After Tax Season: What to Keep and What to Shred,” Jill Schlesinger, CFP, Certified Financial Planner Board of Standards; and AAII.