Document Destruction – Searching and Destroying Outdated Financial Records

March 2013 View more


In retaining financial records our family rule of thumb has been, “Keep everything for seven years,” which inevitably turned into 20 years. So, recently we unearthed boxes of assorted financial paperwork and set about managing the unmanageable. Armed with IRS dictates and other guidelines from a group of Good Housekeeping financial experts and, we learned how long we really need to keep various documents, then purged, organized, and shredded.

Income Tax Documentation

Save your income tax returns permanently but it is unnecessary to keep the supporting documents for longer than three years from the filing date. IRS has three years to launch an audit on your return if it suspects good-faith errors. However, the IRS has six years to challenge your return if you are suspected of under-reporting income by at least 25 percent, and the Feds can come get you anytime for tax fraud and non-payment of taxes.

You have three years from the tax due date to amend your return and request a refund if you uncover a mistake. Thus, that supporting documentation can come in handy.

W-2 and 1099 forms: Keep until you begin claiming Social Security. They’re the best estimate of your earnings and entitlements.

Housing Documents

Permanently retain official documents that reflect the purchase price of your home and major permanent improvements, like new windows. Since capital gains are determined by the price difference from the time a home is purchased and the time it is sold—minus the cost of permanent improvements—-these records may help reduce taxable capital gains when you sell.

Real estate closing costs: Keep for seven years. Don’t forget that attorney’s fees and realtor commissions are also expenses that figure into the sale of your home, too.

If you’ve saved receipts for every nut and bolt you’ve purchased, time to dump. These are non-deductible space-wasters for maintenance and repairs.

Retirement Plan Statements and Other Investments

Keep Roth IRA statements until you retire to prove you paid tax on your contributions. Keep quarterly reports of investments until you can check them against annual summaries. Keep the annual summaries for as long as you own the securities, plus another seven years to prove capital gains and losses.

 Credit Card Statements

Once you’ve checked to see if the transactions match your actual purchases, shred monthly statements. That’s a big source of identity theft. Unless a statement is your only record for a tax-related transaction, there’s no need to retain it, and your issuer may also have it available online.


If you contribute to say, Crusade of Mercy at your workplace, save your December pay stub so you know how much you can deduct. That final pay stub of the year, now available online for many employers, is a treasure trove of official information.

Documentation Destruction Tips

An article by, “How to Organize Your Financial Paperwork,” is a non-preachy piece that will take you to the next step in organizing your financial records going forward.

Cut down on paper. Scanners and PDF formats make it easy to convert paper records to more convenient digital formats. Make a separate backup copy of these records for storage in your safe deposit box or other secure off-site location.

Finally, when it’s time to shred, buy a good cross-cutting shredder that won’t choke on a staple or two. Or take advantage of community shred days, where you can safely rid yourself of a few boxes of documents. In the past, the City of Naperville has partnered with DuPage County, the Hawthorn Credit Union, and Naperville Bank and Trust for community shredding days.