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The IRS requires individuals living in the United States to retain certain documents, for audit purposes.

Are there any other documents that are useful to retain, in addition to those already required by the IRS?

As an example: Say I've faithfully paid my electric bill for the past 30 years. Then, suppose the electric company claims I only paid $20 out of my $50 bill for the month of July last year. If I had retained every electric bill, I could use it to prove that the bill for July had in fact been $20, and that the electric company is in error in charging me $50.

However, the above example seems a bit far-fetched. Are there circumstances where retaining certain bills or statements will help me in a reasonably feasible circumstance?

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Check the statute of limitations in your State, but generally running bills include starting balance. So in case of a utility bill - it will show a non-zero balance carrying forward if you didn't pay your previous bill. They will generally not come out of the blue 5 years down the road claiming you didn't pay a bill - they'll nag you about it every bill they send you.

Try to keep all the bank statements (electronically, nowadays you can just download PDF from your bank), and through that you can track most of your major payments. You can add credit card statements to the mix. Utility bill? If they suddenly discover a mistake in their favor 5 years later - they'll have the burden to prove it, not you.

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@littleadv hit the high points. Two notable exceptions come to mind -

  1. Stock transactions. Brokers are now required to keep your cost basis when you purchase a stock or fund. Previous to this rule, it was wise to keep the statements showing stock purchases to document cost basis.
  2. Real Estate expenses/improvements. For rentals, all documents until 7 years after the sale of the property. For your home, anything documenting an addition or improvement that would be added to your basis so you avoid a tax on the sale. (Yes, there's a $250K/person exclusion, but you might have a higher gain, or the law might change. Better safe than sorry)
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    As a minor nit, my experience with mutual fund shares bought directly from a mutual fund company instead of through a brokerage is that they claim that they have records of share purchase prices only for the last few years. For fund shares bought before 2005 or so, I am glad that I have annual statements listing all mutual fund transactions for the year filed away (and entered in Quicken); the mutual fund companies are of no help. And yes, this includes mutual fund companies that are generally well-regarded and often even recommended here as a good place to invest. Dec 31, 2014 at 14:46
  • @DilipSarwate - sounds like you agree with me, and I should emphasize funds even more so. Dec 31, 2014 at 15:21
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    Yes, I do agree with you. I have no experience with brokerages and don't know if they have records (of open positions) going back to Day One and will retrieve them for their customers or not, but I do know that all my mutual fund statements are saying that the cost basis of older purchases is not known. Dec 31, 2014 at 16:23

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