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Jill On Money: Spring cleaning for your money

Jill Schlesinger on

It’s a happy coincidence for clean freaks like me that the height of tax season occurs as spring begins. The very moment when you are forced to gather and organize your tax materials is a great time to clean up some of those overflowing and physical files and to understand in which instances you can consolidate various accounts.

Let’s start with the easy stuff. Here’s how long you need to hold onto various documents:

Tax returns

Generally, the IRS can include returns filed within the last three years in an audit. If they identify a substantial error, they may add additional years, but the agency usually does not go back more than the last six years. Therefore, keep your returns and all supporting documents for six years. If you work with a tax preparer, ask whether they will maintain electronic copies of all returns filed.

Physical and electronic bills

— Bank/Investment statements: Keep for one year and for taxable investment accounts, flag purchase and sales confirmations for tax purposes. (Note: If you think that you may be applying for Medicaid, many states require that you show five years’ worth of statements.)

 

— Home improvements/major purchases: Until you dispose of the asset.

— Credit card bills: Unless you need to reference something for tax or business purposes, or for proof of purchase for a specific item, you can shred them after 45 days. Flag and keep what you may need for taxes, like charitable contributions.

— Utility and phone bills: Shred after payment unless they contain tax-deductible expenses.

Keepers:

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