The paperwork from bills, receipts, bank statements and insurance policies can quickly become overwhelming unless you keep up with streamlining the clutter. Begin by sorting your papers into categories: legal documents, tax records, banking and investment, utility payments, medical and insurance, pay stubs and other income statements, home improvement and appliance receipts, warranties and appliance manuals. How long you should keep the paperwork depends on the category.
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Legal documents include your birth certificate, deed to your home, homeowners and life insurance policies, vehicle titles, marriage certificate, divorce decree, citizenship or naturalisation papers and your will. You might have additional legal documents to include in this category. Keep legal documents forever.
Keep tax records at least three years if someone else employs you and at least six years if you are self-employed or have several sources of income. Remember to keep all supporting documentation.
Bank Statements and Investment Paperwork
Keep investment records for as long as you own the investment and for three years after you sell it. The exception is if you receive an annual summary. Compare the annual summary to your records and, if it matches, you can toss the year of records. Keep records of retirement plan contributions permanently to prove the amount you contributed and, if applicable, paid the taxes. You might need proof that you paid taxes when you start making withdrawals. Keep bank statements for at least one year. You might need two or more years of bank statements if you plan to buy a home. Keep bank statements and cancelled checks that reflect major purchases, such as a diamond ring, for as long as you own the property.
Keep utility receipts for one year if you do not claim deductions for a home office. Keep the bills for three years if you claim the home office deduction on your taxes.
Medical and Insurance
Keep medical receipts and proof of insurance payments for seven years. Insurance company auditors, as well as the IRS if you claimed a medical deduction, can request proof of payment.
Pay Stubs and Other Income
Keep pay stubs until you receive your W-2 in January. If the amount on the W-2 matches your final pay stub for the year, then you do not need to keep the pay stubs. People who are self-employed or have multiple streams of income should keep their records for six years.
Home Improvement and Appliance Receipts
Keep home improvement and appliance receipts for seven years after you sell your home. You will need them if the Internal Revenue Service audits your tax return.
Warranties and Appliance Manuals
Keep receipts for your extended warranties until the warranty expires. Keep the appliance manuals for as long as you own the appliance. You may need to refer to the troubleshooting guide several years after purchase.
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