What to keep; How long?
The reasons for keeping papers usually center around three themes:
INTERAL REVENUE SERVICE
This category is the most complicated, yet the most important. The purpose of keeping these documents is to take advantage of tax deductions and to be able to answer questions from the IRS. So that’s the lens through which you view your documents.
These are the timeframes the IRS uses:
| If you want to amend your return, you have… | 3 years from the due date or date of filing whichever is later. |
| In general, the IRS will audit you within… | 3 years from the due date or date of filing whichever is later. |
| If the IRS believes you did not report 25% or more of your income, they can go back… | 6 years |
Certain documents relating to available tax deductions may need to be kept longer than 3 or 6 years, such as:
- Purchase documents of investments
- Purchase receipts for business assets that will be depreciated
- Charitable donation records when the total exceeds the annual deduction allowed
- Receipts from a business that handles a lot of cash (i.e. car wash, coin laundry or restaurant)
There may be other items that you need to keep longer for tax purposes. It is wise to check with your tax professional to get advice for your particular situation.
LEGAL DOCUMENTS AND CONTRACTS (including insurance)
| Expired insurance policies | 1 year |
| Insurance claim documents | permanently |
| Contracts | 1 year following expiration |
| Loans | 1 year following expiration |
PROOF YOU PAID FOR AN ITEM OR SERVICE, AND WARRANTY INFORMATION
| Bank Statements/checks | 1 year* |
| Receipts and warranty papers | until warranty expires* |
| Utility/credit card/other household receipts | 1 year* |
*Unless your tax professional advises you differently.
