When it comes to financial records retention, there are no hard and fast rules. Therefore, we have compiled some basic rules of thumb for the retention of records so you can decide which methods work best for you. Due to the general nature of these guidelines, they may not apply to you. Please contact us if you have any questions about your specific situation.
Whether for personal or business records, the general rule is seven years. The IRS has three years to audit you from the date you file your taxes; however, there are exceptions.
Tax may be assessed at any time, without limitation for: ▪ False return ▪ Willful attempt to avoid tax ▪ No return
Other examples include: ▪ Extension by agreement - period is defined by an agreement between IRS and taxpayer. ▪ Substantial omission of items - six years (generally defined as over or under reporting of income by 25%)
These limitations of assessment and collection are defined in federal law. The IRS keeps copies of your returns, but it is up to you, in the event of an audit or any other types of questions, to have on hand all of the backup information that went into the preparation of your returns.
You and your family’s personal health records should be kept indefinitely and should include: ▪ Complete contact information for your personal physicians ▪ Medical history ▪ Prescriptions or treatments prescribed
The general rule is five years from the date of service rendered and includes: ▪ Premium statements ▪ Doctor and hospital bills ▪ Copies of prescriptions
The minimum time frame suggested is five years.
You should keep these records for about 10 years in case you need to prove something with regard to guarantees of workmanship.
Keep a year’s worth (January through December) of stubs until you receive the year-end check of December 31st. This will recap the entire 12 months worth of pay, social security, taxes, etc. Once you receive this, you can discard the weekly, biweekly, or monthly statements you were saving.
The Social Security Administration has all of your employment history on file but you should not rely on them to have accurate records. Review the statement the Social Security Administration sends you to make certain credit has been given for your contributions.
Consider keeping bank statements and reconciliations for three to six months. Banks generally destroy records after seven years.
It is generally recommended that you keep the current three months on hand.
We suggest immediately entering an ATM transaction into your check book register and discarding the receipt after the transaction has been confirmed on your monthly statement.
If you have any stocks, bonds, mutual funds, etc. then you will receive prospectuses, privacy notices, and address confirmations. Do not keep any of these unless you plan to act on them. In regard to your various benefit statements, you may want to keep this information indefinitely in order to determine your future retirement benefits.
If you are writing off your utility bills for tax purposes (i.e. for a home office or rental property), you will want to treat them as tax records and keep for seven years; however, if you cannot write them off, you should keep a minimal amount of bills. Keeping the last three months allows you to establish residency for purposes of driver’s licenses, voter registration, and mortgage applications.
The most important documents are generally recorded in county records. For example, if you use a commercial bank for your financing then it will record a mortgage on the property when you take out the loan. After you've paid off the mortgage the bank is obligated to record a satisfaction of mortgage. If you look at that document, you should see some recording marks along the side indicating the book and page in which it was recorded in the county records; however, to be safe, keep this document for 10 years. If you are doing renovations, make sure you get the satisfaction of lien from the contractors doing the work. Keep this as long as you own the property. When you sell it, the lawyers will do a title search and the title insurance should take over after that.
We hope this helps answer any questions you might have. When in doubt, consider using the seven year rule of thumb for records retention.