How Long Should You Keep Your Records and Legal Documents?
With tax time fast approaching, what a better time to clean out those file cabinets. But how long should you keep your documents? Below are some recommendations and general guidelines.
Note: This is a Texas specific post adapted from an original article drafted by Hook Law Center, P.C. in Virginia.
Typically, you should keep your federal income tax returns and supporting documentation for at least seven years. Review this link to see what the Internal Revenue Service recommends. The IRS has several different periods of limitation. Most significantly, if you have ever failed to file a tax return or have ever filed a fraudulent return, you should keep records indefinitely. (DON’T FAIL TO FILE A TAX RETURN) The best practice is to keep your records for the longest period of limitation recommended by the IRS. But also be sure to check with individual insurance companies or creditors where applicable. For example, if you had a wreck or started a company, keep that year’s records (preferably in hard copy form) for at least a decade.You should keep your Texas tax returns and supporting documentation for the same length of time, at least seven years. The Texas State Comptroller recommends keeping your records for four years from either the due date of the return or the date the return was filed (whichever is later) unless the Internal Revenue Service suggests otherwise.
Therefore, keep all of your tax records for the same length of time at least seven years if not longer.
How long you should keep a contract and supporting documentation varies. At a minimum, you should keep a contract for the length of time that you (or the other party) could file a lawsuit. This length of time is determined by the terms of your contract and the laws in your state. While the terms of your contract may control this length of time, each state law provides a statute of limitations as well. A statute of limitations is a law that bars a party from filing a claim after a specified period of time. In Texas, the statute of limitations for a contract also depends on the type of contract. In general, the statute of limitations for a written contract is four years and for an oral contract, it is four years. Talk to an attorney before assuming your lawsuit SOL is four years.
- Credit Card and Bank Statements
Review this link for a recommendation from the FDIC as to how long to keep credit card statements and bank statements. Keep a copy scanned on your computer in PDF form just in case the online record system is hacked or fails.
- Investment Accounts
Consider keeping investment account statements for the life of your investment, plus seven years for tax purposes. If these assets are contained in a Trust, keep the documents for as long as the Trust is in existence. Trustees are responsible for creating accountings if requested by beneficiaries.
- Documents From A Decedent’s Estate
A great number of our clients serve as a personal representative (either an executor or administrator) of a loved one’s estate. And serving in that capacity requires a great deal of record keeping. How long should you keep those records? The answer to that question depends on the type of records. For example, if they are tax records, see recommendation from the IRS. In addition to considering what type of document it is, a personal representative of an estate should also keep all accounting records, supporting documentation, and related correspondence for at least ten years (or longer if the specific document so requires). While a breach of fiduciary duty claim is typically subject to a much short statute of limitations, a final accounting may be subject to a suit to surcharge and falsify for up to ten years by some individuals.
This should provide you with basic guidelines from various sources to help you trim your file cabinets. Opinions, however, vary as to the exact dates for retaining records and the specific situation of every case. There are also many important documents that should be kept indefinitely.
This article is not intended to substitute legal advice and when in doubt, always contact an attorney. If you have any questions or concerns, please feel free to call Weaver Legal at 817.638.9016.
Don’t let record keeping tire you out.