Recordkeeping — What to Keep?

At year’s end we are frequently asked – what records do I really need to keep?  The quick answer is that you need to keep records as long as the information is pertinent to answer a question or resolve a dispute or inquiry.  But that is not always the answer most clients want. 

Income Tax Records – you need to keep income tax records for at least 3 years past the date the income tax returns were filed.  We recommend longer.  Furthermore, you need to keep any records of purchase of or improvement to assets until at least 3 years after you dispose of the asset and record any capital gain or loss on the asset. 

Personal Financial Records – ordinary monthly bills and the like you need to keep them for a few months to ensure your payments are correctly processed and you can manage your accounts.  But if the expense is part of your income tax return you need to keep them longer.  Such as purchase of bonds, stocks, mutual funds, investment in IRAs, 401(k)s or other plans – this information should be kept much longer.

You don’t have to keep these records in hard copy in a filing cabinet.  You can certainly digitize the documents and information in pdf or similar format and save them on your computer.  But you need to be sure to back up the information in case of loss of access.  For some clients, it may even be a good idea to share the back up with someone else if they are assisting you in your financial and estate matters.

For detailed list of documents and information and our recommendations please refer to the Records Retention Documents in the downloads section of our website.

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