To Shred or Not to Shred?
Fall is among us and with colder weather fast approaching; we will soon be spending more time inside. What better time to clean out your closets and file cabinets?
Typically, you should keep your federal income tax returns and supporting documentation for at least seven years. The Internal Revenue Service provides that “[t]he length of time you should keep a document depends on the action, expense, or event the document records. Generally, you must keep your records that support an item of income or deductions on a tax return until the period of limitations for that return runs out. The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or that the IRS can assess additional tax.” 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.
However, the IRS has assigned other scenarios (such as failure to report income or failure to claim a credit or refund) varying periods of limitation, ranging from two to seven years. To err on the side of caution, best practice is to keep your records for the longest period of limitation recommended by the IRS. Therefore, consider keeping your federal income tax returns and supporting records for at least seven years from either the due date of the return or the date the return was filed, whichever is later.
Virginia Taxes
You should keep your Virginia tax returns and supporting documentation for the same length of time, at least seven years. The Virginia Department of Taxation recommends keeping your records for three 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, seven years.
Contracts
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) couldfile 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. Because a court can find that an express clause in your contract is unreasonable, you should keep your records for the length of the statute of limitations in your state. Once the period of time specified in the statute of limitations has passed, you (and the other party) are barred from filing a claim. In Virginia, 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 five years and for an oral contract, it is three years. See Va. Code § 8.01-246 for exceptions.
Credit Card and Bank Statements
According to the FDIC Consumer News keep your bank and credit card statements for a period of one year; unless they have any tax significance (in which case, keep them for seven years).
Investment Accounts
Keep investment account statements for the life of your investment, plus seven years for tax purposes. This should provide you with basic guidelines from various sources to help you trim your file cabinet. However, opinions vary on the exact dates for retaining records and when in doubt, always err on the side of caution. Moreover, there are many important documents not mentioned above that should be kept indefinitely. If you have any questions or concerns, please feel free to call the Hook Law Center, P.C. and we will be happy to assist you.
ASK KIT KAT
Hook Law Center: Hey, Kit Kat! Any hurricane preparedness tips for pet owners?
Kit Kat: Well, that’s a very good question in light of the fact that we’re now in the midst of hurricane season. If you have pets, you should be prepared to leave on a moment’s notice with them. That includes being able to take with you food and any medications they may have. Their vaccination records are important to bring with you, as well. You should also have identified ahead of time an emergency animal shelter near you or a friend or relative with whom they can stay. In the case of our feline friends, it is recommended that you have a cage for each individual cat in order to transport them to the shelter. This may also have to serve for a time temporarily as their home. Another recommendation is to have photos of your pets to prove they’re yours in case you become separated during the evacuation process. Even in areas not prone to natural disasters this recommendation still applies.
Just look at what happened to a Phoenix family one year. Unusually high heat (113°) caused a crisis for their 3 dogs–2 pit bulls and a mastiff-boxer mix. Their AC went on the fritz, and temperatures inside the house reached 99°. The dogs were lethargic. When despite having enough water to drink, the dogs didn’t have to go to the bathroom, they knew they had to evacuate to a motel. Once there, inside with AC, the dogs perked up.
The Phoenix family acted in time to rescue their pets, and all turned out well. But you don’t want a dramatic helicopter rescue played on cable news to be your pet stranded on a rooftop as flood waters lap around your house. Remember–your pets are like your own children. They depend on you to take care of them. Don’t let them down.
