How Long Should You Keep Financial Records?

Physician's Money Digest, May 2006, Volume 13, Issue 5

You've always been advised to keep holdof your tax documents, pay stubs, brokeragestatements, and other financial records. Butexactly how long should you hang on tothem? According to Bankrate.com, itdepends on the type of record:

•Taxes. This includes your tax returns,canceled checks, and records for deductions.The suggested length of time to keepthese is 7 years. The IRS has up to 3 yearsto audit your tax return for good-faitherrors, and 6 years to challenge your returnif it believes you've underreported yourgross income by 25% or more. After thatdeadline has passed, your old files are nolonger relevant.

•Bank records. Scour through yourchecks on a yearly basis and keep the onesrelated to your taxes, practice expenses,home improvements, and mortgage payments.Shred the rest that don't have anylong-term impact.

•Brokerage statements. Keep yourpurchase or sales slips until you sell thesecurities so you have proof of capitalgains or losses during tax season.

•Bills. After you get a canceled checkback from a bill you've paid, you can goahead and shred it. But for major purchases(eg, jewelry, furniture, cars, etc), youshould keep the receipt for the lifetime ofthe purchase so you can prove its value incase of theft or damage.

•Pay stubs. Keep your stubs until youget your W-2 to check if the informationmatches. If it doesn't, call the IRS to orderthe W-2c corrected form.