How long should I keep my bank statements and records?
No matter how hard I try to stay organized, files just keep piling up. One of the simplest ways to keep it from getting out of hand is not keeping files forever.
The IRS has a great list of how long you should keep documents and files on hand. This list is fairly extensive and somewhat vague. When looking at things like bank statements, it says to keep files for “1 years to permanent”. How then do you determine how long to actually keep your files.
The best rules of thumb that I have heard is 7-10 years across the board for anything financial related. Keep your tax records for 7-10 and your bank statements for that same period.
Here is the IRS info for keeping tax records:
|1||Owe additional tax and
(2), (3), and (4) do not
apply to you
|2||Do not report income that
you should and it is more
than 25% of the gross
income shown on your
|3||File a fraudulent return||No limit|
|4||Do not file a return||No limit|
|5||File a claim for credit or
refund after you filed
|The later of 3 years or 2 years after tax was paid.|
|6||File a claim for a loss from
Electronic Bank Statement Record Keeping
Another great method of staying organized is switching to electronic record keeping. Investing in a good scanner will allow you to quickly convert a long paper trail into a simple digital folder.
The Downside to Electronic Record Keeping
When you start having digital copies of your files, like taxes and bank records, it is best to keep the hard copy for a period of time. This period of time will allow you to establish a good system of making back up copies of all your electronic / digital files and make sure that the scanner is working properly.
On site and Off site backups
If you start using digital storage, then you need to make sure that you do back ups A LOT! Weekly backups are good for most people, while some may need daily. This can be automated with on either your internal hard-drive or an external hard-drive. You should also make sure to have a CD or DVD back up copy that you keep separate from your computer. If you have a safe, that is both theft and fire resistant, place your backup in the safe each week.
Naturally this is a good practice for all of your files, not just financial. Your personal photos, letters and other records should be backed up regularly.