How Long to Keep Financial Records

Dec 15, 2021

File Folder

It’s normal to want to organize files and declutter old records, but you don’t want to throw important papers away if you might need them for taxes, home sales, insurance or other purposes. Here are some good rules of thumb for keeping records.

Tax Records

In general, you want to keep any tax-related records for the period of limitations, which is the time you can amend your returns or the IRS can assess additional tax. Typically, that period is:

  • Three years for normal tax returns
  • Six years for returns with misrepresentations of income (either over or under)
  • Indefinitely for fraudulent or non-filed returns

Keep in mind, the IRS has up to 10 years to collect on taxes, so even if you’re beyond the three-year mark, you might still want to hang on to that paperwork for longer.

Homeowner and Property Records

Once you’ve sold a home or other property, you might be tempted to get rid of the documentation, but don’t be so hasty. It’s a good idea to keep:

  • Proof of loans and mortgages (deeds of trust)
  • Documentation showing you’ve paid off any lien or mortgage, including releases, certificates of satisfaction or even statements marked “paid in full”
  • Deeds in your name that have been paid and recorded in your property’s state or county land records
  • Your original settlement (or closing) statement along with additional forms you may need for tax filing like proof of residency, a 1099-S form, a 1098 form, receipts for any capital improvements you made to the property, or receipts for moving expenses

Although keeping additional records isn’t required, it can be a good idea to compile a binder of renovation permits and warranties as documentation when selling your property.

Other Tips

  • Paper Copies: Even though keeping digital records is convenient, it’s not foolproof. Digital files can get corrupted, hard drives can be erased, and cloud accounts can get hacked. It’s a good idea to keep a paper backup just in case. 
  • Filing System: Keep an organized and logical filing system where you can easily find important documents and make sure your next of kin knows where you store pertinent records should something happen to you.

Have questions about your particular situation? Contact us today for help.