Spring Cleaning: What Financial Records to Keep ─And for How Long?

Financial RecordsIf you’ve completed your 2012 Federal and State Tax returns, you’re probably ready for a good old-fashioned Spring Cleaning. But closets, attics and garages aren’t the only places begging for your attention. It’s probably time for independent financial advisors to tackle those file cabinets, desk drawers and maybe even shopping bags overflowing with financial statements, receipts and correspondence you’ve been afraid to throw out all year─or maybe even longer!

Don’t blush; you’re not alone. Despite the so-called digital age we’ve entered, paper records seem only to have multiplied. And thanks to health insurance and pharmaceutical purchase plans, nearly every mail delivery adds to the growing snail-mail paper trail.

Barring liberal local bonfire regulations, you may have to invest in a shredder to shed documents you no longer need. But you still have to sort through the pile of papers on your own to determine what goes, what stays, and for how long. Here are a few guidelines:

Tax Records:

  • Keep: All documents that support your tax returns for three years after their due date; forms such as W2’s and 1099’s for six years (IRS challenge window on suspected underreporting); and older documents covering home improvements
  • Toss: Older documents including returns if they don’t record property-related transactions

Investment Records:

  • Keep: Documents supporting cost basis of purchases of stocks in 2012, funds as of 2013; similar documentation of investments prior to dealing with your current broker; year-end mutual fund and brokerage statements
  • Toss: Cost-basis documentation you are certain your broker is retaining; monthly/quarterly statements covering your mutual fund and brokerage accounts; bank statements with copies of canceled checks; ATM receipts
  • Keep: Year-end bank statements for three to six years (see Tax Records above); images of tax-related checks such as charitable donations, home improvements, mortgage and tax payments
  • Toss: Copies or images of older checks covering daily, nondeductible expenses; older bank statements

In fact, Fred Fram, Summit’s Chief Compliance Officer, believes that the less paper you have, the safer you are. “Many people are surprised to learn that keeping records too long can be almost as bad as disposing of them too soon because any records you keep create additional risk in the event of a burglary for identity theft,” Fram explained.

As a leading independent broker-dealer, Summit Brokerage Services is able to leverage our leadership and strengths to deliver unparalleled investment advisory programs, support and service. For more information on Summit Brokerage Services, visit www.joinsummit.com or contact us at (800) 354-5528.

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