Document retention: what are bare minimums?

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AQ
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Joined: Mon Feb 25, 2008 11:38 pm

Document retention: what are bare minimums?

Post by AQ »

Trying to simplifying financial matters. I realize many on the forum keep decades of tax forms, etc., but unfortunately I'm not type of people of organized.. So I'd like to come up with a bare minimum list. Please help and ignore some less likely scenarios:

1) Tax returns: just need to keep 7 years.

2) Statements for taxable accounts: no need to keep. the only reason to keep is to know the basis to calculate capital gains/loss? I trade very little and always use average costs. Vanguard provides basis for me (vanguard or others occasionally made mistakes here according to the forum but let's ignore this issue)

3) statements for 401K, Roth 401 K, Roth IRA, deductible IRA: no need to keep. During distribution time, I'm required to pay taxes on the entire amounts anyway. So no point to know when I did the contributions, etc.? (assuming I don't need to money until I'm required to withdraw by law)

4) Non-deductible IRA: just keep the latest Tax return, like form 8606, to keep my cost basis. Since the latest form reports the total basis, no need to keep forms from decades ago. Is this correct?

5) Medical bills / insurance benefits / credit card statements: safe to throw them away after a couple of years? What are main reasons to keep them for 10 year, etc?

Right now I just throw in papers in quite a few of paper boxes, some from 30 years ago. don't have an incentive to organize it or scan it, etc., and in the meantime, would like to scale down this stuff by, say throwing out anything 10 year old. If aforementioned 5 statements are largely correct, then I guess I can do that with little risk.

Many thanks!
jebmke
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Re: Document retention: what are bare minimums?

Post by jebmke »

I do not rely on institutions to maintain historical information. Doing taxes for seniors I have seen many cases of completely hosed up tax documents issued by institutions where the only recourse was to try to reconcile back to annual statements and confirmations and then circle back to get tax statements (e.g. 1099s) corrected.
When you discover that you are riding a dead horse, the best strategy is to dismount.
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pondering
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Re: Document retention: what are bare minimums?

Post by pondering »

Have you gotten advice from a CPA in the state you live?

Maybe try a three box sort
Keep
Scan later
Toss
?
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Bill M
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Re: Document retention: what are bare minimums?

Post by Bill M »

For the bare minimum, retention for tax forms is 3 years from the time you filed the return. Lots of special cases for longer, but you said to ignore the less likely scenarios. See http://www.irs.gov/taxtopics/tc305.html
For medical history, I tend to keep medical bills longer.
small_index
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Re: Document retention: what are bare minimums?

Post by small_index »

AQ wrote:3) statements for 401K, Roth 401 K, Roth IRA, deductible IRA: no need to keep. During distribution time, I'm required to pay taxes on the entire amounts anyway. So no point to know when I did the contributions, etc.? (assuming I don't need to money until I'm required to withdraw by law)
Roth IRAs/401k - Actually these are tax free if held to retirement years, but in the case of an early withdrawal you pay tax on the growth. Early withdrawal would require you to know the amounts you contributed, or you might pay tax twice on that money (and a 10% penalty).
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cheese_breath
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Re: Document retention: what are bare minimums?

Post by cheese_breath »

IMO there’s a vast difference between the bare minimum and what’s wise. There have been threads from others asking for help because they discarded old records no longer required by the IRS and discovered too late they needed them for one reason or another. (One example is needing original cost basis of old stocks they wanted to sell, but didn’t have it.) And of course you can’t be selective in choosing which ones to discard because you don’t know what you might need.

My suggestion is keep all your old boxes of records and store them away in your basement or attic. You might never need them so don’t bother sorting them out now. But if it turns out you do need something years down the road you can search it out then. Also suggest you devise a scheme for organizing your records from here on and put it into use no later than Jan. 1st of next year.

Or you can just toss everything above the bare minimum and hope you don’t need it. But if it costs you somewhere down the road because you don’t have something it’s your own fault.
The surest way to know the future is when it becomes the past.
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Toons
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Re: Document retention: what are bare minimums?

Post by Toons »

AQ wrote:Trying to simplifying financial matters. I realize many on the forum keep decades of tax forms, etc., but unfortunately I'm not type of people of organized.. So I'd like to come up with a bare minimum list. Please help and ignore some less likely scenarios:

1) Tax returns: just need to keep 7 years.

I keep 10 years stored in digital format.

2) Statements for taxable accounts: no need to keep. the only reason to keep is to know the basis to calculate capital gains/loss? I trade very little and always use average costs. Vanguard provides basis for me (vanguard or others occasionally made mistakes here according to the forum but let's ignore this issue)

:thumbsup
Vanguard takes care of that for me

3) statements for 401K, Roth 401 K, Roth IRA, deductible IRA: no need to keep. During distribution time, I'm required to pay taxes on the entire amounts anyway. So no point to know when I did the contributions, etc.? (assuming I don't need to money until I'm required to withdraw by law)

All of those documents are provided online by providers If I need to access but haven't downloaded as of yet,no need

4) Non-deductible IRA: just keep the latest Tax return, like form 8606, to keep my cost basis. Since the latest form reports the total basis, no need to keep forms from decades ago. Is this correct?

Works for me.TaxAct does the carryforward for 8606

5) Medical bills / insurance benefits / credit card statements: safe to throw them away after a couple of years? What are main reasons to keep them for 10 year, etc?

Medical Bills I scan save in digital format/card statement are online If I need to review,rare/insurance benefits are onine/

Right now I just throw in papers in quite a few of paper boxes, some from 30 years ago. don't have an incentive to organize it or scan it, etc., and in the meantime, would like to scale down this stuff by, say throwing out anything 10 year old. If aforementioned 5 statements are largely correct, then I guess I can do that with little risk.

Pretty much paperless here other than birth certificates/marriage license/will(also stored digital)/Car titles. :happy

Many thanks!
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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Toons
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Re: Document retention: what are bare minimums?

Post by Toons »

Toons wrote:
AQ wrote:Trying to simplifying financial matters. I realize many on the forum keep decades of tax forms, etc., but unfortunately I'm not type of people of organized.. So I'd like to come up with a bare minimum list. Please help and ignore some less likely scenarios:

1) Tax returns: just need to keep 7 years.

I keep 10 years stored in digital format.

2) Statements for taxable accounts: no need to keep. the only reason to keep is to know the basis to calculate capital gains/loss? I trade very little and always use average costs. Vanguard provides basis for me (vanguard or others occasionally made mistakes here according to the forum but let's ignore this issue)

:thumbsup
Vanguard takes care of that for me

3) statements for 401K, Roth 401 K, Roth IRA, deductible IRA: no need to keep. During distribution time, I'm required to pay taxes on the entire amounts anyway. So no point to know when I did the contributions, etc.? (assuming I don't need to money until I'm required to withdraw by law)

All of those documents are provided online by providers If I need to access but haven't downloaded as of yet,no need

4) Non-deductible IRA: just keep the latest Tax return, like form 8606, to keep my cost basis. Since the latest form reports the total basis, no need to keep forms from decades ago. Is this correct?

Works for me.TaxAct does the carryforward for 8606

5) Medical bills / insurance benefits / credit card statements: safe to throw them away after a couple of years? What are main reasons to keep them for 10 year, etc?

Medical Bills I scan save in digital format/card statement are online If I need to review,rare/insurance benefits are onine/

Right now I just throw in papers in quite a few of paper boxes, some from 30 years ago. don't have an incentive to organize it or scan it, etc., and in the meantime, would like to scale down this stuff by, say throwing out anything 10 year old. If aforementioned 5 statements are largely correct, then I guess I can do that with little risk.

Pretty much paperless here other than birth certificates/marriage license/will(also stored digital)/Car titles. :happy
Boxes=clutter :sharebeer

Many thanks!
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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grabiner
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Re: Document retention: what are bare minimums?

Post by grabiner »

cheese_breath wrote:IMO there’s a vast difference between the bare minimum and what’s wise. There have been threads from others asking for help because they discarded old records no longer required by the IRS and discovered too late they needed them for one reason or another.
One of my examples: I needed my 1997 W-2, which I still had, in order to fill out my 2011 and 2012 NJ state tax returns properly. Therefore, I know to save the tax returns forever, but not all the supporting documents.

(What happened is that I contributed to a 403(b) in 1997, rolled it over to a traditional IRA, and converted the Traditional IRA to a Roth IRA in 2010, paying the tax in 2011 and 2012. The federal tax was based on the full amount converted, but NJ does not allow a tax deduction for 403(b) contributions, so I had to determine how much of the conversion was not taxable in NJ.)
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Davistax
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Re: Document retention: what are bare minimums?

Post by Davistax »

Scan each year & store digitally. Been doing this since 1997. Storage space is the size of a book on my 500 gigabite usb drive.
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