According to experts, financial records related to information on your tax returns should be kept for six to seven years. The statute of limitations is six years for tax returns that fail to report at least 25 percent of gross income and three years for clean returns. There’s no statute for fraud or failure to file altogether–which is a good reason to get your tax returns in on time!
Financial records that don’t relate to tax returns or prove ownership in an investment or property can be shredded after several months or a year. Personal credit card statements, for example, can be shredded immediately if you have access to the information online. Hard copies of quarterly business financial records can be shredded as soon as you present information to the board–you don’t want those pages lying around, and you likely have a digital copy of the report for future reference.
Four Tips for Shredding Financial Records
1. Know What to Shred
Have a good understanding of the documents you can shred and what you need to keep. In addition to items that backup information on tax returns, you should also keep mortgage papers for properties you own, titles, certain health records, birth certificates, and copies of insurance policies.
2. Understand How the Law Affects Your Business
When shredding financial records, understand how industry-specific document laws may impact how you deal with shredding. Health facilities must take extra steps to protect patient records and confidentiality, and any business that takes credit card payments must comply with strict PCI standards.
3. Create an Organized Document Disposal Process
Store archived documents in sorted and dated archive boxes or filing cabinets so you know when each set of pages can be shredded. Create an organized process that limits the handling of each document as it’s transferred to storage and then to shredding. Reducing the number of times documents are handled reduces the chance for errors, lost documents, or at-risk information.
4. Use a Professional Shredding Service
Schedule regular shredding with a professional service to limit your exposure even more. A professional shredding company has industry-leading processes in place to protect your sensitive information before, during, and after the shredding process.