In 2014, a man paid dearly to the IRS after failing to produce financial statements from three years prior. This is one of the many examples illustrating the dangers of not knowing when to discard important reports. Scroll ahead to learn how to appropriately store such files without the paper trail.
What Are Bank Statements?
Bank statements are detailed records of your financial transactions, including deposits, withdrawals, and fees. They are not only essential for verifying transactions but also required as proof of income or expenses when needed. Besides monitoring account activity, these documents help track your spending and manage budgets.
Why Should You Keep Them?
Bank statements are needed for tax filing, dispute resolution, and loan applications. They provide a verified financial history, which helps regulatory boards detect suspicious activities, if any. Retaining these records ensures you have accurate documentation in case of discrepancies or legal requirements that may arise over time.
What Happens If You Lose Them?
Losing bank statements can expose you to numerous potential risks. Without them, you might miss vital details about your transactions or account activity, leaving you susceptible to identity theft or worse. Important financial records become inaccessible, making verifying charges, tracking expenses, or filing accurate tax returns harder.
Paperwork To Retain For A Year
Monthly accounts and receipts for everyday purchases should be kept for about a year. They are required to reconcile end-of-the-year accounts and manage annual budgets. After one year, dispose of them securely unless they are needed for tax purposes, warranties, or documentation.
Files To Store For Seven Years
Retain tax return records, such as income, interest, or deductions, for three to seven years. Although the IRS recommends a storage period of three years, the statute of limitations for audits is up to seven years if there’s a claim of loss due to bad debt or securities.
Documents That You Should Safeguard Forever
Certain financial documents linked to significant life events, for example, buying a home or settling a court matter, must be kept indefinitely. They provide essential proof that can prevent future disputes and make managing your finances easier and more organized.
Where Should You Keep Bank Statements?
Store hard copies of documents in a locked, fireproof safe or filing cabinet. For digital records, use encrypted cloud storage. Alternatively, you can use a password-protected folder on your computer for soft copies of important files. Organizing them by year and type ensures ready access when you need them in unexpected situations.
How Can You Keep Them Secure?
Sensitive information can be protected from prying eyes through storage in secure, private places. Avoid leaving confidential files in easily accessible areas. For digital statements, use strong passwords and two-factor authentication. Look out for unauthorized activity and update security measures to stay ahead of conmen.
Steps To Be Taken If You Lose Your Bank Statements
If you lose a bank statement, contact your provider immediately. They can send you a duplicate copy of the statement with a small fee. It’s also wise to monitor your account for any unusual transactions in the months after the loss. Digitally backing up your files averts such crises.
Appropriate Disposal Of Documents Is Important
According to the Consumer Sentinel Network reports, approximately 3.2 million identity theft cases were filed in 2019. Properly disposing of financial documents can save you from becoming a part of the statistics. Simply throwing them away puts you at risk of scams and unauthorized access to your accounts.
How To Safely Dispose Of Printed Documents
Shredding is the optimal way to destroy printed bank statements. Cross-cut shredders are preferred over strip-cut ones since they make it harder for thieves to reconstruct documents. Some community centers and financial institutions offer secure shredding services to help you responsibly remove sensitive data.
How To Carefully Erase Digital Documents
The best way to discard digital statements is to delete the files in question and subsequently empty the recycle bin. Follow up by using a reliable file erasure tool to eliminate any chances of recovery. If your documents are on cloud storage, double-check to make sure they’re permanently deleted.
Importance Of Monitoring Paperwork
Regularly reviewing these documents helps detect unauthorized transactions and suspicious account activity early on, minimizing potential issues. It also aids you in budgeting your money, preventing overdraft fees, and swerving charges that can be easily avoided, thus ensuring you maintain good financial health.
Optimal Frequency Of Examining Checking Account Statements
Reviewing checking accounts at least once a month is necessary to identify discrepancies at the earliest. Besides, keeping an eye on your spending patterns can help you avoid overdrafts and manage your finances more effectively, giving you greater control over your day-to-day cash flow.
How Often Should You Monitor Savings Account Statements
Checking your savings accounts on a quarterly basis can help you track your interest earnings and fees. Additionally, these reviews ensure your money is safe and growing as estimated. If you catch unexpected deductions or lower interest rates, you can promptly address these issues with your bank.
