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October 26, 2016

When Should You Shred?

When Should You Shred?

You want to keep your company secure by properly disposing of any sensitive documents, but how do you know how long to keep things on file? Here are some common things you might have on file in paper form, and how long professionals recommend you keep them before you shred.

Bank receipts and records: Keep ATM and teller receipts until you receive your monthly bank statement and check to make sure all the transactions are correct, then you can shred them. Keep statements for the year until you do your taxes, then you can shred unless you need to keep them to show evidence of a payment, charge, balance or expense.

Benefits information: Keep all benefits documents and notifications from your employer as long as you are covered by those benefits.

Business records: Keep documents related to a business, including assets, employment taxes, expense reports, invoices, accounts payable/receivable ledgers for seven years before shredding. Keep profit and loss statements, annual reports, financial statements, meeting minutes, corporate bylaws and business formation documents permanently.

Canceled checks: Keep for a year unless needed for tax purposes, then keep for seven years before shredding.

Credit card statements: Once you’ve cross-referenced the charges with your receipts and paid the bill, there’s no reason to keep these unless you need to show proof of a payment, such as a charitable deduction. If they contain tax-related expenses, keep for seven years.

Contracts: Keep all paperwork as long as the contract is active, and after the contract is no longer in force if you have any reason to think you’ll need to refer back to the terms.

Health records: Keep these indefinitely, unless they are for minor procedures. If you are claiming a tax deduction for medical expenses, keep paperwork for seven years.

Home expenses: Keep all documents related to the sale, maintenance and improvement of your home as long as you own your home.

Home sale: Keep real estate closing documents for seven years.

Human resources files: Keep all files on current and past employees as long as they are employed and for seven years after they have left your employment. Keep paperwork on job applicants that were not hired for three years after the application was submitted, then shred. If there was an issue with an employee, such as a workers’ comp claim or a lawsuit, keep all documentation for 10 years after the issue has been resolved.

Insurance policies: Keep the documents for any policy that is in force. Once you get the new policy, you can shred the old one.

Investment statements: Once you review your monthly and quarterly statements for 401(k), IRA, 529, Keogh, or other investment accounts, you can shred them. Keep annual statements until you sell the investment or close the account.

IRA contribution records: Keep as long as the IRA is open, to prove you paid taxes on those contributions when the time comes to withdraw.

Loan documents: Keep all documents for loans—mortgages, car loans, student loans, business loans—as long as you have the loan. Once the loan is paid off, you can shred the paperwork, but keep the final loan payoff document for seven years.

Mortgage documents: Keep all records until the loan is paid off. Once the loan is paid, keep the deed and the promissory note (marked paid) as well as the HUD statement.

Paperwork for major purchases: Keep the receipts, warrantee information and instructions for major purchases such as furniture, appliances and electronics as long as you own the item. (You can shred the warrantee after it expires.)

Pay stubs: Keep pay stubs for the calendar year until you get your W-2 (and you verify the amounts match), then you can shred.

Receipts: Keep credit card receipts until you get your monthly statement and check all the amounts for accuracy. Keep receipts for items that you may need to return or exchange, that are under warranty, or that are for expenses you need to claim on your taxes or for which you plan to seek reimbursement from an employer or other entity.

Social Security statements: Keep each statement until you get the new one, then shred the old one.

Tax returns: Keep tax returns and all supporting documentation for seven years in case of an audit, which can happen up to three years from your filing date if the audit is random, or up to six years if you fail to report more than 25% of your gross income. After seven years you can shred supporting documentation. Some people keep the actual tax returns indefinitely (the IRS can audit you anytime if they suspect fraud), but others convert them to electronic files and shred the paper documents.

Utility bills: These can usually be shredded as soon as they are paid, unless you are using them to document a tax deduction or expense. In that case, keep for three years before shredding.

Vehicle records: Keep all records—sales and loan documents, instructions, warrantees, maintenance records and log—as long as you own the vehicle. Once the vehicle is sold and title and registration are transferred, you can shred the paperwork.

The following items should be kept indefinitely and never shredded:

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