Do you have boxes of cancelled checks from the 1970s? The receipt for a dishwasher you bought 11 years ago? Papers for a car you sold 5 years ago? Little Sally’s 4th grade report card? Wouldn’t you love to throw all that away? How much of this paper are you supposed to keep, and for how long? If you are going to throw it away, how should you do it?
One consideration in how long to keep a document relates to the statute of limitations that would apply if you were to be sued in connection with the underlying transaction. The statute of limitations for breach of contract is 6 years. That would apply to most purchases or sales of goods or services. So generally, after 6 years from the contract date, you cannot sue or be sued on the contract, and you could throw it away. However, many contracts provide for shorter time limitations, so you should actually read the contract to make sure. Different time periods apply for other legal claims such as professional malpractice or personal injury. Consult an attorney if these issues are relevant to you. Also be aware that where fraud is claimed, that may alter the time limitation.
Under both federal and New York State law applying to income taxes, there is a 3-year statute of limitations for auditing underreported income and going after additional tax. However, if the understatement is “substantial,” generally 25% of the total, that can be extended to 6 years. There is no statute of limitations at all if you fail to file a return, or if civil or criminal fraud can be proved. If you own a business, or your return is complicated for other reasons, it is recommended that you keep your returns for 6 years rather than 3 years. Before shredding those tax returns, check your account with Social Security to make sure they have accurately recorded your earnings.
It is recommended that documents concerning the purchase and financing of real estate be kept for 7 years after you sell it. Remember that capital improvements made while you own the real estate will reduce your gain, and tax, on the sale. So keep those receipts as well.
Generally, bank and investment account statements should be kept for 1 year. These days, most financial institutions maintain your monthly statements on their websites for longer periods. It is a good idea to download these statements and save them on your computer in a password protected folder.
Many seniors are concerned about long term health care. When applying for nursing home Medicaid, there is a 5 year “look back” period. You will be required to provide monthly bank and investment statements for the last 5 years. If you think this might be in the future for you or your spouse, keep those records. Beginning April 1, 2022, there will also be a look-back period for home or community-based Medicaid. The initial lookback period will be 18 months gradually increasing to 30 months by April, 2023.
Most states require doctors and medical providers to keep medical records for 6 or 7 years. Patients may want to keep test results forever so they and their doctors can track the history of diseases or conditions.
In New York, schools are required to keep student records for 20 years. For those who have children with developmental disabilities or behavioral issues, keeping IEP and 504 plan records and test results can help in obtaining special services both during and after school years.
How to get rid of all this paper? We all know that we live in the age of identity theft. We don’t want sensitive personal information exposed to the world. That includes Social Security numbers, bank account numbers, dates of birth, credit card numbers, insurance and health information, and more.
I recently found a college ID card from the 1970s which showed my Social Security number. That must have doubled as my student ID number. It’s hard to imagine that that is how they used to do things. It also had a photo of me with full head of bushy hair and hippie beads! I am definitely not throwing that away. But if I wanted to, I could not simply throw it in the trash. The best way to dispose of unwanted documents is to shred them.
Small home shredding machines are available at stores like Staples and Target. You want to buy one that is strong enough to shred a credit card, and also, what is called cross-cut. It cuts the paper into little pieces like confetti, not long strips.
If you really have a mountain of paper, banks sometimes have shredding days when you can bring your papers to the parking lot and a big truck shreds the paper. Stores like Office Depot and UPS offer shredding services. Businesses like law and accounting firms hire companies that periodically pick up trash cans of paper for shredding.
As always, if have any questions about whether or not to keep particular documents, ask a professional.
This is not intended to be legal advise. You should contact your attorney to discuss your specific situation.
This article appeared in the April 22, 2022 edition of the Senior Gazette.