Financial Spring Cleaning

Julia Carlson |

With spring cleaning underway and Tax Day almost over, a common question we get this time of year is, “What documents should be kept and what can be shredded?”

As for what to shred, the IRS generally has up to three years after the due date of your tax return to begin an audit, so you can toss most of your supporting tax documents after three years. To be safe, you should keep your returns and supporting documents for seven years if you had a more complex return that included items such as a loss from worthless securities or a bad debt deduction. Also keep records of your home’s purchase price and major home improvements for three years after you sell your home.

You can also shred monthly statements from your bank and investment firm after you receive your year-end statements. Get rid of ATM receipts and bank-deposit slips as soon as you match them up with your monthly statement. You can also discard your pay stubs after seeing that they agree with your W-2 for the year. Shredding these documents will help protect your identity.

It’s a good idea to keep records of stock and mutual fund purchases made in taxable accounts for as long as you hold the investments. The records will come in handy when you sell shares and must report the purchase price, date of purchase, and number of shares involved. Additionally, hang on to records of any stock or mutual fund dividends you’ve reinvested so you can avoid paying taxes on them again when you withdraw the money.

Happy spring cleaning!

Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision. 

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