To shred or not to shred? - KMSP-TV

To shred or not to shred?

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Bryan Bussert, Tax Manager at Baker Tilly, provides the following information:

Do Not Shred

1.      Charitable contribution letters or acknowledgement documents provided by recipient organization should be reviewed upon receipt (to ensure they include required language for income tax deduction) and retained for at least 3 years

2.      Retirement plan transaction statements which summarize rollovers or conversions should be kept indefinitely

3.      Investment confirmations or statements which reflect cost basis (i.e., purchase price) for investments, including closing/settlement statements for purchases of real property, should be retained at least through the end of the 3rd year following the sale or disposition of the investment/property

4.      Tax returns should generally be kept as long as available, secure space will permit; that being said, income tax returns should be retained at least 3 years, but preferably 6 years (due to IRS audit time frames), and gift tax returns should be kept indefinitely, as the estate representative will need at death

5.      Individuals with businesses should keep indefinitely records related to inventory, capital purchases (e.g., machinery, equipment), leases, contracts, insurance coverage, and financial statements

6.      Enduring documents (e.g., wills, trusts, deeds, life insurance policies, marriage certificates, divorce decrees, business formation documents and agreements with business partners) should rarely be destroyed

Shred

1.      Bank, brokerage, and other general statements can usually be shredded after retaining for 3 years, unless needed to substantiate certain deposits or payments, cost basis of investments, warranties, or some other purpose

2.      Many bills, invoices, deposit slips, canceled checks, receipts, and other sales and expense records can be destroyed after keeping for a 3 year period

3.      Tax documents such as W-2s, 1099s, 1098s showing deductible/creditable mortgage and/or educational expenses, Schedule K-1s, or other items which may show tax withholding should be kept for at least 3 years, although some of these documents (e.g., K-1s for investments) may be retained longer for alternative uses

4.      Medical and dental expense statements can generally be destroyed after 3 years, unless needed for a non-tax purpose, including treatment or insurance reasons

5.      Pay stubs can be shredded after 1 or 2 years, assuming there are no discrepancies when reconciled with annual Form W-2

Bryan W. Bussert, CPA, MSA

Tax Manager

Baker Tilly Virchow Krause, LLP

One Towne Square, Suite 600, Southfield, MI  48076

Connect AT: http://www.bakertilly.com

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