Clearing the Clutter
What documents to hold, and what to shred

If your file cabinets are overflowing with old statements and records, you are not alone. Knowing what you should retain and what you can shred is a common question. Here are some general guidelines to help you determine what should be kept and what can be destroyed.

Year-End and Annual Statements: Once you receive year-end reports, it’s a great time to purge your monthly statements. Compare the original monthly statements with the year-end records to make sure they are accurate. Keep the quarterly statements from your 401(k) or other plans until you receive the annual summary; if everything matches up, toss the quarterlies. Keep the annual summaries until you retire or close the account.

Bank Statements: You can get rid of bank deposit slips once you’ve reconciled your statement. Keep the statement if you are paying bills online – especially if any of those bills are going go toward tax deductions. Review your statements for errors – especially unusual fees. If your bank statements become part of your supporting documents for income taxes, keep them for at least three years. You can toss ATM receipts after your bank statement arrives and you ensure everything matches.

Tax Returns: Keep your tax returns for at least seven years, but you can generally toss your supporting documents three years after you filed your taxes. You’re usually safe from being audited after that time, unless you failed to report a big chunk of your income. If you have any self-employment income, keep the records for at least six years.

Investment Information: Keep records showing what you originally paid for mutual funds, stocks and bonds until you sell them and report the gain or loss on your taxes. If you made a nondeductible contribution to an IRA, keep the records indefinitely to prove that you already paid tax on this money when the time comes to withdraw.

Your Home: Since most homeowners can now keep profits from the sale of a residence tax-free, they don’t generally think to keep home improvement records anymore. But it’s still useful to hold onto the receipts, because you could end up paying a tax bill when you sell your home if you have lived in it for less than two years or if you end up with more than $250,000 in profit if single or $500,000 if married. All home improvements that add value to your home (not just regular repairs) may lower your tax bill, and you should keep receipts for as long as you own the home. The information can also help document the work you’ve put into the house when it’s time to sell.

Credit Cards: Throw credit card receipts away once they appear on the credit card statement after ensuring that they match, unless they are going to be included as a business expense.

Paychecks: Paycheck stubs should be kept until you receive your end-of-year tax statements. When you receive your annual W-2 form from your employer, make sure the information on your stubs matches. If it does, you can toss the stubs. If it doesn’t, you should demand a corrected form, known as a W-2c.

John Sammut helps individual investors, families and corporations protect their purchasing power and improve investment results. You can reach Sammut by telephone at (800) 343-3036, or visit him at www.johnmsammut.com

This article is provided by John Sammut, a financial consultant with RBC Wealth Management in Syracuse, N.Y., and was prepared by or in cooperation with RBC Wealth Management. The information included in this article is not intended to be used as the primary basis for making investment decisions nor should it be construed as a recommendation to buy or sell any specific security. Consult your investment professional for additional information and guidance. RBC Wealth Management does not provide tax or legal advice.