Keep tax records for 7 years then what?

How long should individuals keep their tax records, credit card statements, mortgage payment statements, utility bills, etc.?

Answer-
Most tax related documents should be kept for seven years unless the paperwork concerns a potentially taxable investment or asset, such as your home or stocks bought outside a retirement account. In that case, keep the paperwork as long as you own the investment or assets, plus seven years.
For example, hang on to the paperwork created when you bought your home, such as sales contracts, deeds, mortgage paperwork, appraisals and surveys, as well as the costs of any home improvements since they can help reduce any potential tax bill when you sell. You can dispose of all this documentation seven years after you sell the property.

Why seven years? Your greatest risk of audit is in the first three years after you file your return, but you can still be audited up to six years later if you substantially underreport your income. Since we file our returns in the following year, last year’s returns are due in April of this year, so adding seven years to the tax return year will give you the year that you can toss your return’s documentation. This year, for example, you can toss tax-related documents filed for the 2002 tax year.
If it’s not tax related your holding times vary. You typically can ditch credit card statements and utility bills after a year. Old insurance policies can be shredded after they’ve lapsed or been replaced, and there’s no chance you’ll file a claim against them.

You can dispose of your pay stubs after comparing them with your annual W-2 form. One option is to have a vendor scan this information for you and out it on a CD for archiving purposes. The actual paper isn’t as important as the information on it, and most sources including the IRS accept electronic documents.

Just make sure to back up regularly and keep those backups in a safe place preferably a local record center offsite. Also have the documents professional destroyed and shredded to insure your identity and confidential information is not jeopardized. Remember, these are rules of thumb and you should consult a professional or attorney to see how long to keep the various documents you may have. For more information email us at sales@offsitedatadepot.com.

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