I spent a large chunk of today (and a large chunk of money) sorting through old files and financial records and getting a professional shredding company to destroy them. This is something we do here at the office every few years. If we didn’t, the sheer amount of paper would take over the universe.
All of which begs the question – how long do you have to keep important papers?
Some papers, of course, you have to keep forever. Always keep your birth certificate, your passport, and things like that. Although, honestly, in this digital age, even those things are somewhat easily replaced with the proper forms and replacement fees. The government is pretty good at record keeping. Other things, however, like receipts and contracts, aren’t so easy to find again. So what do you do?
According to the IRS, for its purposes, you need to keep most records for three years. You need to keep some records for seven years, especially if you’ve filed a claim for a loss from worthless securities or a bad debt deduction. (The IRS also points out in its official FAQ that you have to keep records indefinitely if you don’t file a return or if you file a fraudulent return. I found this to be hilarious. If you’re the kind of person who doesn’t file taxes or who files fraudulent taxes, you’re also probably the kind of person who doesn’t keep meticulous records. But what do I know?)
If the records are related to real property, like your house or land that you own, you have to keep the records until the statute of limitations has expired after you’ve sold the property. This could mean that you hold on to those records for decades, and then four years or so after you sell the house. You will need them to figure out capital gains tax or any loss.
Of course, taxes aren’t the only reason why you might keep records. A good rule of thumb is to keep records for as long as anyone could sue you for whatever is contained in those records. How long that is depends on what you are talking about. For what it is worth, banks tend to hold on to records for seven years, so if you want to play things conservatively, the seven-year rule is a good one for you to abide by as well. No one will fault you for not being able to put your hands on an eight-year old document. But seven years old they might, because that’s a popular unwritten rule. That’s the rule I follow, anyway.
So this afternoon, in March 2019, I kept everything that got closed out after February 2012, even if most of the work was done before then. If any work at all was done on the file before seven years ago today, I kept it. I’m not taking any chances, even if my storage building is stupidly crowded and full of spider eggs.
Nothing in this article should be construed as legal advice. It is being offered for informational purposes only.