What Can We Shred? What Must We Keep?

Is your home storage overrun with paper? Not sure what you can discard?

While by law there is no specific time requirement for personal record retention, traditionally, tax filers are required to keep the documentation that supports all claims on tax returns until the statute of limitations has passed, which is three years. Because the burden of proof rests with the taxpayer, it is to your advantage to retain accurate and complete records, especially for deductions. Further, if the IRS finds a return to be false or fraudulent, they can dig back further. Therefore, many CPA’s suggest that you keep returns and documentation (including bank statements and cancelled checks) for six years as a rule of thumb.

If you own a home or investments, including stocks or a business, which you have held for longer than six years, then you will want to keep your returns and any associated documentation for as long as you have held the investments because each tax year is linked by those investments.

Regarding investment statements, most companies provide annual statements that contain all transactions for a whole year. If so, you can comfortably throw away all quarterly, monthly and transaction confirmation statements. If there isn’t a year-end statement, you should keep all of the other statements.

And what about insurance papers? Don’t throw out policies until they have been lapsed for over five years because many life insurance policies may be reinstated within five years, depending on your current health conditions. You should always keep current insurance policies and old annuity policies that were rolled into new policies. You could be asked to verify your original cost basis, which the old annuity policies will state. Car and home insurance policies generally renew every six months, so you can throw away the old policies and replace them with the new.

Now, for the 10-year-old warranty for the toaster oven that you sold at the garage sale last year, feel free to dispose. Which brings up the issue of disposal and protection …

With the ever increasing prevalence of identity theft, the proper destruction of records has become critical. Don’t put yourself in the position of being a victim. Shred or destroy all documents with personal information. Never put non-shredded documents out for curbside recycling.

If you don’t have a personal shredder, the Coast office employs a shredding service and we’d be happy to share it with you.  Feel free to drop off your documents for shredding and we’ll add it to the pile.