Record Keeping Requirements for Individuals

Well-organized financial records will save you time and money, not only in taxes but also in tax preparation.

Here's a quick rundown of suggested recordkeeping for individuals.

• Keep your critical records indefinitely. Other records can safely be discarded after several years.

• Keep tax returns (and any records used to prepare them) at least three years after the filing date if you have only W-2 and interest income, preferably six years if your returns are more complex. The IRS has six years to audit you if it suspects you've underreported income by more than 25%.
  
  
• For investments in real estate, keep records until at least six years after the filing date of the return reporting the sale of that property.
  
  
• For investments in stocks, bonds, and mutual funds, keep year-end brokerage statements and 1099s and toss interim statements. Retain all brokerage confirmations showing your cost basis.
  
  
• For your home, keep the settlement statement and records of home improvements. These validate your cost basis for future home sales if they are needed.

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