For how long should you keep tax records?

March 26, 2010 11:58:05 AM PDT
If you find yourself pawing through piles of paper at tax time, you're not alone. A Consumer Reports money adviser says knowing what to keep and what to throw away are crucial to staying on top of your finances.

About 16 percent of us have lost money because we couldn't find an important paper.

When Josephine Bentley-Vega was audited five years ago, she was panic stricken. For years she had just stuffed her financial paperwork in boxes and bags.

"I spent hundreds of hours with different piles of paper on the floor. And it was just a, just a nightmare," she said.

Josephine has developed a much better system with the help of a professional organizer. Consumer Reports Money Adviser's Greg Daugherty says a big hurdle in conquering piles of paper is that we don't throw enough out.

"You only need to save your bank statements for one year, unless you use them to prove deductions that you claim on your tax return. Otherwise it's seven years, which is the same as your tax return," he said.

You can also get rid of utility and service bills after you get the new bill. And consider going paperless.

"You can avoid getting paper bills in the first place if you pay your monthly bills online," Daugherty said.

But what about those bank deposits, credit card receipts, and ATM records cluttering up your life?

"You can toss these scraps after checking them against your bank or credit card statements," Daugherty said.

However, Consumer Reports says there are documents you should never throw away and that should be stored in a safe deposit box.

Birth and death certificates, marriage licenses, Social Security cards, and vehicle titles are some examples.

When you're tossing stuff though, Consumer Reports advises using a shredder so that no one can steal important information by going through your trash.

Josephine says getting organized allows her to be more productive and a lot less anxious.

"You can sleep well at night," Josephine said.

Another piece of advice from Consumer Reports is to make copies of anything you store in a safe deposit box so that you have them on hand for easy reference in case you need the information.

Consumer Reports is published by Consumers Union. Both Consumer Reports and Consumers Union are not-for-profit organizations that accept no advertising. Neither has any commercial relationship with any advertiser or sponsor on this site.

(All Consumer Reports Material Copyright 2010. Consumers Union of U.S. Inc. ALL RIGHTS RESERVED.)


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