File It Under D…For Donut

There are so many bad jokes I can make with a title like “How Long Should I Keep…” but I will let you fill in the blanks for me.  Do you have a filing cabinet at home, filled to the brim, that you haven’t actually opened in a year? Is the “everything drawer” in your kitchen exploding with not only 15 pairs of chopsticks, but also receipts? Finally, is your glove box filled with the last 6 years of registrations, insurance cards as well as a random Sesame Street band aid? Maybe that last one is a bit too specific, but you get my point.  It can be easy to let the papers pile up, and this is especially true if you are just not sure if you’ll ever need them again.  Years ago I watched this comedian, Mitch Hedberg, do a great bit on getting this super long receipt for a donut.  The joke progresses as he says he’s going to save it, and file it away under ‘D” for donut in case a skeptical friend ever questions whether he really bought that donut (LINK).  As you make your way through this tax season, here are some helpful tips for what and how long to save your treasure trove of documents, either as a hard copy or electronically:

  1. Tax Returns – A best practice for tax returns and all filing related documents is to keep them for 7 years.  If you want to be extra conservative, just keep everything as long as possible.
  2. Investment Statements – There is not a hard and fast rule on this one, so my advice is to keep investment statements for 7 years as well.  Oftentimes your investments play in the same sandbox as your tax return, so having the two together for the same 7 years is a prudent approach.
  3. Receipts – The vast majority of receipts can go straight in the trash. There are some exceptions for any purchase that is tax deductible (example – energy efficient hot water tank), health related expenses I would keep for 3 years , and any purchase that had a warranty associated with the product (example – new fridge or automobile servicing/repair receipts).

After reading this, I hope your weekend is filled with shredding parties, burn piles and of course, donuts.

Happy Friday!