Records - Which to Keep and When to Discard Them

Deciding which records to keep and for how long can be a confusing process. A well-organized system will help you retain important paperwork and minimize the clutter. Use legal requirements and your common sense as guidelines for how long to hold on to records.

Tax records

You should keep tax records for at least as long as it is possible for the IRS or other tax authority to audit your return. Generally, the IRS has three years after the return is due or filed, whichever is later, to examine your return and assess additional tax. This is called the "statute of limitations." The Florida statute of limitations is being reduced from five years to three years in a phased manner.

If you've made a major error on your return (defined as omitting more than 25% of your gross income), the IRS has six years to examine your return. To be on the safe side, keep your tax detail records for seven years after a tax return is filed. There is no statute of limitation for fraudulent filing or for returns that are not filed at all.

The IRS does not require that you keep your records in any particular way. The only requirement is that you keep your records in a manner that allows you and the IRS to determine your correct tax liability. Keep checks, receipts, and other records that document the income and deductions you reported on your tax return. Copies of tax returns themselves should be retained permanently.

Investment records

Investment records generally should be kept until the investment is totally liquidated, plus a period of seven years. For certain property sales, records should be kept permanently. You can usually toss monthly or quarterly investment statements if you receive a comprehensive annual statement.

Other records

Important records, including vehicle titles, will and trust documents, insurance policies, contracts, and birth and marriage certificates, should be kept in a safe place. An inventory of your valuable property, along with photographs or a video, should be made and kept current, in the event your house is robbed, damaged, or destroyed.

Before you purge documents, review them for their importance. Call us if you have questions about retaining records. For further information see Keeping Copies of Your Tax Returns

© Copyright 2001 Raymond S. Kulzick. All rights reserved. 010318.