Keeping old documents

[Michael Moore]

I've got several boxes of old tax returns and I'd like to thin the herd as much as possible. I bet I could eliminate two Bankers Boxes of stuff very easily. Some of that stuff goes back to 1990 or possibly earlier (who knows, I haven't looked in those boxes for a looooong time).

I'd often heard that a 7 year retention period (in the absence of fraud etc) was all that was needed before the statute of limitations would run with the IRS. Is that pretty much the case? I did look at an IRS publication on recordkeeping and 3-6 years seemed to be what I saw mentioned, depending on the type of document.

There are no investments from that period that would need to be tracked, and all of the house purchase/mortgage stuff is filed in a separate location.

It sure would be nice to make a bit more space.

cheers,
Michael

 

[VoyT]

I've heard the 7-year rule ... personally, I keep records going back 10 years. Sounds like it's time to fire up the shredder!

 

[d]

you know what will happen as soon as you toss those documents, don't you?

 

[saluki9]

Do you have somebody who might let you use a high speed scanner.

About once a year I take all of my old documents to the office on a weekend and feed them through our scanner. Then they go onto a DVD and the paper goes into the shredder.

 

[Michael Moore]

Yes, what happens after I shred them is a concern (and I'm familiar with how Mr. Murphy works).

Scanning seems like such a chore. I had a small side business many of those years, so lots of the paper is receipts for something purchased from someone else. I suspect that if I haven't gotten audited on any of that really old stuff, I probably won't (fingers crossed).

I can see keeping my tax forms/W2 for each year and then ditching all the rest of the stuff. That would let me debulkify quite a bit. Tossing the old bank statements/canceled checks would help even more.

Speaking of which, does anyone else have a partner that wants to hang on to 5+ year old utility bills? If I sneak in I can usually get away with throwing away the envelopes (with the ever so important cancellation date on them) and the stuffers from the utility company. But I can't get her comfortable with the idea that if we have gone a year without any contact from PG&E or the garbage/water people they are unlikely to come and harass us about an error in the old billing.

The curious thing is that she is also a retired Fed who had to deal with the concept of "administrative finality" at work.

I'm not about to point fingers at heaps of personal "stuff" as I've got plenty of my own (though I'm trying to work through it) but this saving the phone/garbage/water/elect/gas bill stuff for decades just seems a bit much.

cheers,
Michael

 

[uncledrz]

This is first cup of coffe advice so don't hold me to anything here!
The seven years is a pretty good rule for IRS audit/review questions. Outside of the IRS review/audit, if you have assets that are not in tax deferred accounts, when disposed of you will need to establish basis, so you might have to keep some records for years more.
The scan then shred idea is one that could let you keep the required information, but reduce the bulk.

 

[BUM]

I think uncledrz nailed it. I used to hoard statements, cancelled checks, check registers, tax returns and the associated paperwork... everything. A few years ago I bought a shredder and reduced it all to a 4 drawer file cabinet. All thats left is 5 years of returns, and current stock/bond/real estate basis documents.

Some of you may have received some of the fodder with your Ebay purchases

 

[audreyh1]

The papers I keep indefinitely:

- anything to do with a major asset like a home - purchasing documents, major upgrades, etc. You'll need this when you sell.

- Purchase information on any investment (in a taxable account). Fortunately I get an annual statement from Fidelity that lists all purchases that year, so I am able to just keep those and shred all the individual statements from during the year. You have to be able to show your cost basis.

- Tax return for any year I made an IRA contribution that wasn't qualified to be tax-deferred. Unfortunately, you have to keep these returns for any year that you made such a contribution because it "proves" your basis for your IRA.

Other than that - most recent 7 years of tax returns and supporting documents (cancelled checks, etc.)

Oh - I only keep the recent 12 months of utility bills - no more than that.

Audrey

 

[Martha]

This is kind of funny.  Here are the IRS recommendations on how long to keep tax records: http://www.irs.gov/businesses/small/article/0,,id=98513,00.html

From the article:

The time you are required to keep records includes the period of time during which you can amend your tax return to claim a credit or refund, or that the IRS can assess more tax. The following situations contain 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.

1.You owe additional tax and situations (2), (3), and (4), below, do not apply to you; keep records for 3 years.
2.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.
3.You file a fraudulent income tax return; keep records indefinitely.
4.You do not file a return; keep records indefinitely.
5.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.
6.Your claim is due to a bad debt deduction; keep records for 7 years.
7.Your claim is due to a loss from worthless securities; keep records for 7 years.
8.Keep information on an asset for the life of the asset, even when you dispose of the asset; keep records indefinitely.
8.Keep all employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.


So, the IRS claims fraud for taxes due five years ago, you say no fraud, and at your recommendation I only kept three years of records.. . . Yeah, right.

 

[Martha]

Unless you live on the wild side, I would keep tax records for seven years.  I have returns and supporting documents in my office at work going back to 1986.  When I leave I will destroy most of the old returns and back up material.

I also have in my office information on all the real estate we have owned.  I kept the records to support basis claims.  I also kept sale documents, like the purchase agreements, in case anyone ever sues. 

We keep purchase/basis information on investment assets for at least 7 years after the asset is sold.

Years ago my brother had a small car accident with our dad's car.  My dad died a year or two later and we threw a lot of things out.  Including any insurance policies for the car. I didn't know about the accident.  Then my brother got sued for the car accident.  Man was it hard even to figure out who the insurance company was.  So keep canceled insurance policies for a few years, maybe 6 or 7, so the statutes of limitation on claims can expire.

I don't keep bills like electric  bills or property tax bills at all.  I can always find out the information from the electric company or county.  I only keep medical bills/explanations of benefits  to run them through my medical reimbursement account.  Then they get tossed. 

We have bank records going back maybe 7 years.  It was nice to have the canceled check to prove to the IRS I did in fact pay taxes for three years when they suddenly thought I had not.

Our will/trust is floating around my office some place. . . http://www.bankrate.com/brm/news/mtg/20000518h.asp

Here is a pretty good list of what to keep, for how long, and why:

 

[grumpy]

I refuse to be the records repository for the government. How many times do you hear about someone seeking gov't records only to be told - "sorry those records were lost when the courthouse burned down in '86"? When I start running out of room in my small two drawer file cabinet, I just start tossing the oldest stuff. It doesn't matter how recent it is, if I don't have room for it I just get rid of it. I'm willing to take the (vanishingly small) risk that I might some day not only need that piece of paper but also that I'd be able to find it if I kept all that crap.

Grumpy

 

[tryan]

Always thought of old tax returns as a liability ... so I asked my accountant how long I need to keep the stuff ... he says 7 years is safe BUT you also need to keep any home improvement receipts indefinately in case a home sale is questioned.

Being that the bulk of my tax return is rental related ... I keep everything.

 

[Nords]

I'm willing to take the (vanishingly small) risk that I might  some day not only need that piece of paper but also that I'd be able to find it if I kept all that crap.

In the early '70s one of my troops cohabited with his active-duty girlfriend, who later became his spouse. They shared housing allowances for about a year before they were married and had to choose a single married housing allowance.

Seventeen (17!) years later the government came after them for fraudulently obtaining housing allowances. However they were able to prove with their old pay statements and their marriage certificate that they had done the right things at the right times. The penalties for that type of investigation are a lot more severe when you're an E-8 than when you're an E-3.

I don't have credit-card receipts for more than seven years (or until they become illegible) but I have every pay statement since 1978 and nearly every tax return that I've ever filled out. I'm sure my heirs or the Smithsonian will find them very interesting.

 

[AltaRed]

The papers I keep indefinitely:

- anything to do with a major asset like a home - purchasing documents, major upgrades, etc.  You'll need this when you sell.

- Purchase information on any investment (in a taxable account).  Fortunately I get an annual statement from Fidelity that lists all purchases that year, so I am able to just keep those and shred all the individual statements from during the year. You have to be able to show your cost basis.

- Tax return for any year I made an IRA contribution that wasn't qualified to be tax-deferred.  Unfortunately, you have to keep these returns for any year that you made such a contribution because it "proves" your basis for your IRA.

Other than that - most recent 7 years of tax returns and supporting documents (cancelled checks, etc.)

Oh - I only keep the recent 12 months of utility bills - no more than that.

Audrey

I pretty much follow Audrey's practice with one exception. Last month's utility bills are shredded once the current month arrives...and I only do that in case I need to phone the utility company and need the number and account number.

I save my investment notices from the broker and the Annual Trading summaries. I don't keep investment statements and I save receipts only on those major purchases that come with warranties, guarantees, etc.

Anything more seems to be a useless waste of storage space and eventual headache.

 

[larry]

Ok, now along these same lines, has anyone ever had an experience with the IRS regarding the use of Quicken/MS Money, etc as documentation proof? Did the IRS accept these data as proof of payment?

 

[free4now]

Until reading this thread I hadn't thought about the need to keep cost basis records after selling the assett. After all, you could get IRS audited years after selling the asset.

 

[OldAgePensioner]

I shredded nearly 4 ft. high stack of paper when leaving Chicago. Including all tax returns, even last years.

I used TurboTax for about 10 years now. So I took all the attachments like W2, 1099s, etc and scanned them for each year and put the scanned images in the Tax folder left by Turbo Tax.

I made a CD of my data and put it in a safety deposit box in Chicago, I have a duplicate with me and it's all still on my laptop.

Shouldn't that be all the government would need in an audit?

I'm pretty much paperless these days, maybe an inch thick folder.

 

[d]

Shouldn't that be all the government would need in an audit?

what you don't have is what they will need