If you are like me you are thinking about (or in the middle of) spring cleaning! Even if you aren't, I’m sure document retention is a topic that pops into your mind from time to time. Wouldn’t you love to purge all of those dusty boxes or draws of paper? If so, read on!
How many years of tax returns should I keep? How long must I hold all of my account statements? Are all of these sheets of paper really necessary? They are all great questions and you are in the right place to find the answers!
Income Tax Returns:
Most people will only need to keep copies of their filed income tax returns for 7 years*. The IRS has the ability to assess additional tax payments for up to three years after the return was filed. Conversely, if entitled, a taxpayer has three years to file or amend a return to receive a refund. However, if the IRS finds that you missed claiming more than 25% of your reported income, they can review returns that were filed up to 6 years ago.
*If you make non-deductible contributions toward retirement savings, it’s best to keep page 1 of your 1040 and copies of your form 8606 along with any supporting statements, attachments or worksheets corresponding with each applicable year. This will provide support, if needed, to confirm non-taxable distributions from your non-deductible IRAs and retirement accounts.
If you electronically file your returns, or you keep electronic copies, there’s no harm in keeping them all since they don’t take up much space!
Statements:
Statements are helpful to track historical information associated with your investment accounts like contributions, distributions, and cost basis (investment value of a security used for tax purposes). We generally recommend that you maintain each year-end or December statement for each account as well as the most current statement available. For example, when your March statement arrives, you can shred (or destroy) your February statement for that account. This will help you to preserve the historical data while also decluttering your files. The year-end files are especially helpful for after-tax, direct held (non-brokerage account) mutual fund accounts where the ongoing cost-basis is generally not included on each statement.
Electronic Delivery:
Many, if not all, of the communications generated by your investments are available for electronic delivery, also known as e-delivery. Utilizing this form of communication will reduce paper clutter, allow for easier filing, and best of all, it’s environmentally friendly! If you are interested in e-delivery and would like some assistance getting signed up, we’re here to help.
We are happy to discuss any of these items in further detail or answer any questions you may have. We can be reached by email: info@dynamicretirement.com
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC, or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward-looking and should not be viewed as an indication of future results. Kestra Financial is the parent company of Kestra Investment Services, LLC, member FINRA/SIPC and of Kestra Advisory Services, LLC.
This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed by Kestra Financial LLC as to the accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. The indices mentioned are unmanaged and cannot be directly invested into. Past performance does not guarantee future results. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market. The Dow Industrial Average is an unmanaged index of 30 stocks. Neither Kestra Investment Services, LLC, nor Kestra Advisory Services, LLC provide legal or tax advice and are not Certified Public Accounting firms.
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