Financial Record Retention

Ask the Organizer

How long should I save monthly mortgage payments?
Danielle Mazzeferro

We all suffer from an overabundance of paper in our households and workplace. One of the most frequent questions I get asked is how long we actually have to save the paperwork.

In regard to your specific question it is important to keep all annual statements from your mortgagee that include principal, interest, escrow information and real estate taxes. It is also suggested that you retain mortgage and tax receipts as well as cancelled checks. While I would love to tell you to get rid of these once your house is sold, it is recommended that these records should be kept indefinitely. For more information on what documents should be retained for your home I encourage you to check with your accountant and refer to IRS Publication #523 “Tax Information on Selling Your Home.”

Now that tax season is approaching there is no better time to organize all of your financial paperwork, whether you prefer to keep hard copies or scan the documents into your computer. This is the time of year we all begin panicking about gathering all those loose receipts, remembering where our donation slips were last seen and hoping the accountant does not get frustrated with us for losing the paperwork on our recent stock sale.

If you have an efficient filing system throughout the year preparing for taxes can be a breeze. When you sit down to fill out your taxes you will have everything you need and you might even enjoy filling out the forms. I know that’s wishful thinking! If you have an accountant he or she will thank you too.

To prevent paper overload stick to these simple rules and only keep what’s most important:
Tax returns: (7 Years) The Internal Revenue Service (IRS) has six years to challenge your returns. It is important to retain original copies of the return as well as supporting documents such as receipts.
Investment Records: (2 Years) You want to compile records of your trades. If your investment company or stockbroker sends you year-end summaries you can discard your monthly statements and reduce paper. In addition, you want to save records of all non-deductible individual retirement accounts to prove that you have paid taxes on that money.
Credit Card Bills: (1 year) Once you have reviewed the monthly statement it is permissible to shred it when the next bill arrives. However, if you are self-employed, you will want to keep your statements and file them with your tax records.
Bank Statements: (3 years) Be sure to attach your pay stubs and canceled checks when you file them.
Charitable Deductions: (6 years) Most likely you will be retaining these records with your tax returns therefore similar rules apply.
Medical Records: (6 years) Items to keep are receipts and insurance payments for dentists, doctors, hospitals and prescriptions.
Home Related Records: (Duration of home ownership + 7 Years) It is important to save real-estate records, transactions, property tax paperwork, warranties as well as the title and deed to your house. In addition, retain documents identifying home improvements such as contracts and receipts.
Vital Statistics: (Permanently) Passports, birth certificates, marriage and divorce papers must never be thrown away.

Kristin Mastromarino is a professional organizer and owner of Livable Solutions Professional Organizing and The Organized Lifestyle retail store in Guilford, CT. (www.theorganizedlifestylestore.com). You can e-mail her your questions at Kristin@livablesolutions.com.