It’s always smart to keep your tax returns on file. Old returns can come in handy when you’re making important financial decisions, such as applying for a mortgage or insurance. Additionally, technology has made it even easier by allowing you to file your returns electronically and eliminate the paper copies. Below are some records that are imperative to keep on file indefinitely:
Home records: It’s important to keep records regarding your home’s purchase price and major home improvements for three years after you sell the home.
Stock and mutual fund records: You’ll need these records when you sell your shares in order to report the purchase price, date of purchase and number of shares involved.
Form 8606: Holding on to these records will save you from paying taxes on any money you take out from your non-deductible IRA contributions in retirement.
Although it’s important to keep a majority of your tax records, there are a few you can toss at the end of tax season. You can get rid of ATM receipts, bank-deposit slips and pay stubs as soon as your receive your year-end statements. It’s usually safe to throw out paper copies of your credit card, utility, phone and cable bills as long as you don’t need them for tax purposes. But with that advice, be sure to shred all documents so you don’t subject yourself to identity theft.
For more information on which tax records to keep and which to throw out, visit Kiplinger.