Record Retention
Several times during this past
winter, several people asked how long they should keep their records.
In answer to that question,
perhaps the following can serve as a guideline for you.
First, we should sort the
records based upon three categories. Depending on your specific
situation, these items may not always match as listed. However, these
are generic listings:
• Category 1 - Consumer
Items
Consumer items would typically include your day-to-day bills such as food
utilities,
charge accounts and clothing.
However, if these are used in your business, put them
in Category 3.
• Category 2 - Asset
Purchases
These would include not only the statements from brokers showing the purchases
of
securities, but also include the
purchases of real property and major improvements
to your real estate.
• Category 3 -
Income Tax
These would be the documents that prove the items on your tax return.
Now, let's deal with the three
piles of paper.
Most of the items in Category 1
can be thrown out when you are sure that your creditor has given you credit for
your payment. You can probably clean these out by June of the subsequent
year.
The Category 2 items should be
retained in some orderly fashion. In addition, these should be held as
long as you own the underlying asset. If you dispose of the asset, then
the cost records get transferred to your Category 3 group in the year of the
disposition.
The Category 3 items should be
retained for seven (7) years after you have filed the related tax returns.
This may mean that several of us
can go out and have a big bonfire this year. July 4th is our national
birthday. Go ahead and light up the night!
If you have any questions
regarding this or any other issue, please contact
us.
