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How long should I keep my financial records?

I realized while doing my taxes that I have my tax records going back to 1998. How long should I keep that information?

Apr 20, 2012 by Dorinda from New Iberia, LA in  |  Flag
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6 votes

Seven years is the general rule, unless you have other reasons for holding on to them longer (e.g. I have some clients who have records going back 20+ years - but they have trouble throwing ANYTHING away.....)

Comment   |  Flag   |  Apr 21, 2012 from Plano, TX

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2 votes

Dorinda,

Recently, I found the following on the IRS website for another client;

How long should I keep records?

The length of time you should keep a document depends on the action, expense, or event the document records. Generally, you must keep your records that support an item of income or deductions on a tax return until the period of limitations for that return runs out.

The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or that the IRS can assess additional tax. The below information contains the periods of limitations that apply to income tax returns. Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date.

Note: Keep copies of your filed tax returns. They help in preparing future tax returns and making computations if you file an amended return.

You owe additional tax and situations (2), (3), and (4), below, do not apply to you; keep records for 3 years. You do not report income that you should report, and it is more than 25% of the gross income shown on your return; keep records for 6 years. You file a fraudulent return; keep records indefinitely. You do not file a return; keep records indefinitely. You file a claim for credit or refund* after you file your return; keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later. You file a claim for a loss from worthless securities or bad debt deduction; keep records for 7 years. Keep all employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later. The following questions should be applied to each record as you decide whether to keep a document or throw it away.

Are the records connected to assets? Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure the gain or loss when you sell or otherwise dispose of the property.

Generally, if you received property in a nontaxable exchange, your basis in that property is the same as the bases of the property you gave up, increased by any money you paid. You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition.

What should I do with my records for nontax purposes? When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. For example, your insurance company or creditors may require you to keep them longer than the IRS does.

Comment   |  Flag   |  Apr 20, 2012 from Lititz, PA

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2 votes

As a rule of thumb, seven years. However, if you have documentation that would be required to support the cost basis for investments that you still have, then you should maintain that as well.

Comment   |  Flag   |  Apr 20, 2012 from San Francisco, CA

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