How long should you hold on to such documents as bank statements, canceled checks, canceled certificates of deposit, brokerage and mutual-fund statements, and income tax returns and the accompanying backup information?
The IRS can audit an individual tax return for up to three years after the date the return was filed, says Sam Rosenberg, partner in the Bensalem, Pa., accounting firm Rosenberg & Pastor. So keep the records that document your tax return for at least three years after the filing date. Rosenberg says to keep forever copies of the actual tax returns and canceled checks for tax payments.
“I have seen cases,” he said, “where the IRS says, `We received the return you filed 10 years ago, but we don’t have a record of you having paid the tax.’ “
Year-end statements from brokerage firms or mutual funds should be kept as long as you hold the investments involved so that you can keep track of the cost basis of your investments. This is especially true if you reinvest dividends and capital-gains distributions on your mutual funds or other investments.
Similarly, records on the purchase of your home and receipts for improvements to it should be kept until the home is sold so you know its full cost basis.
