Ask the Expert: What are the rules for record retention?
How many years should I save bank statements and records of direct deposit of paychecks, medical bills, tax returns, etc.?
It's a good idea to keep copies of your tax returns and all the documents that support them (including W2 and 1099 forms) for at least seven years.
The reason: The Internal Revenue Service normally has up to three years after you file a return to audit you. But it has up to six years to audit you if it believes you underreported your income by more than 25%. And you have up to three years to amend a tax return in order to claim a refund — and up to seven years if you're claiming a loss for worthless securities.
You can shred most company bills after paying them. But experts advise keeping receipts for medical bills for one to three years, in case your insurer asks you to document a claim. And you should keep receipts for big-ticket items like refrigerators, washing machines and computers as long as you own the item.
It’s easier to keep records than it used to be. Banks, credit card companies, brokerage firms and health insurers — including Medicare — offer monthly electronic statements documenting your purchases, deposits and medical claims. Download those statements to your computer and sort them in annual folders. (Don't forget to periodically back up the computer!)
Of course some documents should be kept forever, including birth, death, marriage and adoption papers; wills; passports; and yes, retirement account beneficiary forms. It's your IRA beneficiary form, not your will, that governs disposition of the account when you die. It's often a mistake to assume your bank or broker has a copy of that form.
The bottom line
Save your tax returns and supporting data for at least seven years.
