It’s important to store various documents in order to protect your identity and financial freedom. For instance, if the IRS decides to audit you six years down the line and you don’t have records that proved you gave the charitable donations you said you did, or that outline your legitimate business expenses, you could find yourself owing them more money than you can pay.
Still, you don’t want to have a room or storage unit filled with old paperwork that you no longer need. Here’s how long you should hang onto various important records:
This category includes bills, such as for phone, internet, car payment, electricity, and so on. Generally, you need only the latest bill. This category also includes income sources like your social security statement and your retirement plan statement.
This includes anything you can claim on your taxes, including receipts and bills paid. It also includes credit card statements, bank statements, and pay stubs.
Some supporting tax documents are important to keep for three to seven years. This is because the IRS can audit you for any year in the last seven. Make sure to keep your W-2 and 1099 forms, your bank statements, and receipts for charity.
Some documents are important to keep your entire life. While you can discard your supporting tax documents after seven years, you should keep your tax returns permanently. Other things to keep include birth and death certificates, passports and ID (until replaced), social security cards, marriage and business licences, wills, living wills, and power of attorney, insurance policies, house deeds, mortgage documents, and various legal paperwork. Most of these can be replaced if necessary, but doing so is a hassle, and you definitely want to have these when you need them.
If you have any sort of loan, keep the related documents until the loan is paid off. Hold onto a vehicle title until you sell the vehicle. Keep warranty documents for the duration of the warranty on an item. Hold onto investment paperwork until you sell the investment, and finally, hold onto medical records and bills until one year after the final bill is paid.