When you do your taxes, you are supposed to keep track of them for seven years. That is because the Internal Revenue Service generally has seven years to audit your taxes if they think that you made a mistake. Most people are aware that they should keep important financial records, but there are other bills and receipts that are less obvious. You know that you need to keep the refrigerator’s warranty until it expires, but what about your electricity bill? Should you keep your internet bill as well?
If you do not receive paperless statements, then you may still be one of those people who has to track all of their receipts, financial documents and bills in a shoe box. Hopefully, you have some kind of organization system in place so that you do not have years of different bills tossed in together. If your shoe boxes are a mess, try looking at the age of the documents as you organize them. Depending on their age, you may be able to shred them up and throw them away instead of keeping them.
How Long Should I Keep Utility Bills?
As a general rule, you should keep any bill that you have not paid yet. You should ideally pay off the bill before it is due. If you are paying your bill late for some reason, you should definitely keep the paper bill hanging around to make sure that you do not forget about the bill on accident.
Home Improvement Records: Many people forget that they should store their home improvement records for at least three years from the due date of their tax return. This is the return you do that shows the income or loss you made on the home when you sold it. Those improvement costs help you show the Internal Revenue Service just how much money you made or lost when you owned the home. If you plan on selling the house and have made improvements, keep your records for the next seven years because they may be able to help you lower your taxable gain when you eventually do sell the property.
Birth Certificates and Marriage Certificates: It is important to keep all documents like this forever. Make sure to keep your birth certificates, adoption papers, records of paid mortgages, death certificates, marriage license and wills in a safe place.
Real Estate and Investment Records: In general, you will want to keep your real estate records and investment records on hand for three years. This is based on Internal Revenue Service rules about auditing. If they do audit you, you will need to use these documents to show your capital gains tax based on your cost basis and the taxes you owed when you sold these investments.
Records of Paid Loans: If you have paid off your loans (Congratulations!), make sure to keep a record of it for seven years. After that time period is up, you can throw the record away.
Receipts While you can throw out most of your receipts, there are some receipts that you should keep. If you plan on itemizing your tax return, you will need to keep receipts from anything that you plan on itemizing. Make sure to keep all of these receipts for the next three years of tax returns.
Medical Bills: Medical expenses are another cost that can actually lower your tax burden. You need to keep a record of these bills to support any deductions you claim on your tax returns. In addition, your insurance company may request that you send them proof that you visited your doctor or actually received a certain procedure. You should keep your medical bills for a year just to make sure that your insurance company will not need them. If your expenses were more than 10 percent of your adjusted gross income and were un-reimbursed allowable medical care expenses, you may be able to deduct them. In this case, make sure to hold onto the medical records for three tax years.
Tax Returns: The Internal Revenue Service generally recommends that people keep their returns for three years from the date that they filed the original return or two years from when they paid the tax—make your decision based on whichever date is later. If you are claiming a loss because of bad debt deductions or losses on securities, then you need to keep your tax records around for seven years.
Utility Bills: Utility bills still need to be saved for a while, but you do not have to save them as long as you do for other items. In most cases, you only have to keep your utility bills for one year. If you plan on claiming your home office as a tax deduction, then you will need to keep your utility bills for three years.