The same is true when you buy, sell or insure something. The main reason for filing away financial documents is to be able to defend your annual tax returns if needed, but there are other reasons to save certain types of paperwork. Some financial documents should be kept for the long term. The IRS statute of limitations for auditing is three years.
State statutes of limitations can vary, so check with a tax professional on the limitations in your state. Your best bet is to hang on to your tax returns as long as possible. You also should consider saving documents that verify the information on your returns for at least seven years, like W-2 and forms, receipts and payments. If you have receipts related to assets, like receipts for home remodeling projects, keep these for as long as you are the owner.
Documents that fall into this category include non-tax-related bank and credit card statements, investment statements, pay stubs and receipts for large purchases. Keep these records on hand for a year if you need them to support your current-year tax preparation or as proof of income when making a large purchase.
The Federal Trade Commission suggests holding on to your paid medical bills for a year before tossing them—unless you have an unresolved insurance dispute, in which case you would retain the medical bills until the dispute is resolved. Medical bills are confusing, and having records on hand to dispute payments or errors is wise. Many banks and credit card issuers offer electronic statements now, so you may not need to keep paper copies on hand, which will cut down on excess clutter.
If keeping other documents around longer term makes you anxious, you can opt to scan them to create electronic copies and then dispose of the original paper documents. You can toss most monthly bills after you pay them, or after the payments have credited to your bank statement. If you end up needing to go back to verify anything, see if you can access past bills through online account access. Many companies keep past bills and invoices available online for the past few months or longer.
Some canceled checks should be saved, though, if they are related to tax returns, like any charitable giving. Important papers to save forever include:. This includes titles, deeds, insurance policies, warranty documentation and more. Health insurance policies and related documents are important to keep long term, too.
So long as your health insurance is active, you should keep these records. The same is true if you receive disability or unemployment benefits. Either way, you should review your statements at least once a month to make sure there are no ugly surprises in there. About two-thirds of Americans now use digital banking, either via a phone app or on a personal computer.
More than half continue to get their bank and credit card statements by mail, though. Not surprisingly, older consumers are much more likely to prefer paper documents. There may be some satisfaction in seeing the actual piece of paper that you signed, although such documentation doesn't exist for electronic purchases.
In any case, whether you have a paper filing system or access your records online, there may come a time when you'll need your old statements for any of several reasons. If you haven't opted out of monthly bank statements by mail, keep them for a minimum of one year. If your account is online-only, review the deposits and withdrawals monthly to make sure they're correct.
Alternatively, if you're great at data entry, you can record your income and expenses in a bookkeeping program or a spreadsheet. After one year, it's safe to shred and discard the paper with one big exception: Anything that documents a tax deduction should be kept for at least three years. The IRS says it rarely goes back farther than that in audits, although it reserves the option to do so. If your account is online, the records will be either archived online or available by special order from the bank or financial institution.
American Express, for example, keeps three years worth of account transactions online and searchable. Chase Bank users can access seven years of account activity. Access to a record of your recent purchases, bill payments, and payroll deposits is necessary for a number of reasons, not least as a proof of payment in case of a dispute.
You should review your bank account activity regularly for evidence of identity theft and debit card fraud. The statements provide verification of illicit activity and are used to recover any damages.
You may need your bank statements when you do your income taxes in order to verify your income and costs such as charitable contributions and business expenses.
Bank account statements confirming large purchases or payments may also be worth keeping. Credit card statements and other personal documents should be kept for 6 years. This is as far as HMRC can ask you to go back if you're being investigated for tax purposes. Your bank will allow you to access your statements for at least one year online most banks keep them for five years or more! If you receive bank statements by post, you should keep these for a minimum of one year, in a safe and private place.
After one year, it is safe to shred and discard bank statements. If you opt out, though, you may still receive generic advertising. Also, if you opt out of online behavioral advertising, you may still see ads when you sign in to your account, for example through Online Banking or MyMerrill. These ads are based on your specific account relationships with us.
To learn more about relationship-based ads, online behavioral advertising and our privacy practices, please review the Bank of America Online Privacy Notice and our Online Privacy FAQs. You're continuing to another website that Bank of America doesn't own or operate. Its owner is solely responsible for the website's content, offerings and level of security, so please refer to the website's posted privacy policy and terms of use.
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