Spring is here and tax day has passed for another year. Hopefully your taxes are filed and tucked away. But now is a great time to do a spring cleaning of your finances to get rid of old records and get organized so that next years taxes are easier. Often times people are unsure of what they need to save, how long to save it, and what is safe to get rid of. Keeping up with organization through the year and only saving what you need can help keep it straight and make next years taxes easier to complete.
According to the IRS, there are different timelines for how long to keep different records depending on your situation. If you owe back taxes, haven’t filed for specific years, or have amendments that need to be made or are pending, these guidelines do not apply to you. However, if your taxes are straight and no issues are pending, here is a basic guide for how long you need to keep specific documents.
- Tax Returns – Three to seven years is recommended. Keeping a digital copy forever is also recommended.
- Investment Papers – Any documents involved with investments, such as IRAs, home sales, and other investment documents should be held for seven years.
- Bank Statements – Two years, after that, they can be destroyed.
- Credit Card Records – Once you have verified they are correct, you can destroy them. Unless it involves a tax related payment, then three to seven years.
- Pay Stubs – Two years, after that, they can be destroyed.
These guidelines are for IRS tax purposes only. If you have financial documents involving creditors, insurance, or other agencies, they may require you to keep records longer.
After cleaning all your records, set up a system that helps you keep track through the year for easy access at tax time next year. Don’t save items unless absolutely needed. Saving receipts is only necessary if you need them for a warranty. Once your bank or credit card statement is checked, receipts can be tossed. A good rule of thumb is to consider if you can retrieve the information should the IRS want it. If it can be reprinted, toss it. If you have a digital copy, destroy the paper copy. Before you know it, your finances will be as ready for spring as you are.