When can I shred it?

Here's a handy guide with suggested time frames that will help you decide what to keep and what you can safely shred: TAX RETURNS: To be safe, keep copies of your tax returns and supporting documentation for seven years. The IRS has three years from the date you file to audit your return if they believe you have made an error. They have six years to audit you if they think you underreported your gross income by 25 percent or more. However, if they think you filed a fraudulent return, there is no time limit. In that case, let your conscience be your guide. IRA CONTRIBUTIONS: Keep these records permanently, especially if you made a non-deductible contribution to your IRA. Keep them so you can prove why you are not required to pay tax on that portion again when you withdraw it during retirement. RETIREMENT/SAVINGS STATEMENTS: Keep quarterly statements until you get the annual statement. Keep all of your annual statements until you retire or you close the accounts. If in doubt, keep them forever. BANK RECORDS: If you get cancelled checks, go through them at the end of the year and keep the ones that are related to your taxes, business expenses, home improvements and mortgage payments. Keep these permanently. Shred the ones that have no long-term importance. Keep monthly bank statements for seven years. BROKERAGE STATEMENTS: Keep these for at least three years after you sell the securities and have settled with the IRS for any capital gains. BILLS: In most cases, once you have received a cancelled check or statement showing the payment has cleared your account, you can shred the billing statement. The water bill? No need to keep that once you are sure your payment has been credited. However, bills for larger purchases like appliances with warranties, jewelry, collectibles and so forth should be retained for verification of value in case of an insured loss. PAYCHECK STUBS: Keep these until year end when you receive and reconcile your W-2 statement of earnings from your employer. HOME RECORDS: Keep documents and records related to buying and selling real estate for at least six years, if not permanently. Also keep records documenting improvements you make to your home or condo. These expenses will reduce the capital gains tax you owe when you sell for a profit. RECEIPTS: Keep them as long as they relate to an active transaction. For example, the receipt for your new lawn mower should be kept in the owner manual. You will need this proof if there is a warranty issue. But the receipt for last month's groceries? Shred it. Ditto for other consumables, unless they represent a legitimate tax deduction. If any receipt (including a utility bill) is a tax deduction, keep it and store it with your years tax papers.