How long should you keep files?  This is an often asked question and one that generally gets a variety of answers.  "Best Practices" evolved several years ago from a highly tiered structure to one having on a few retention classifications.  The ultimate rule, however, is "when in doubt, don't throw out".  The following are some of the guidelines we use when advising our clients on deciding what documents should be kept and when others should be discarded.

Keep for 3 Years:

• Utility records (6 years if tax related)
• Credit card statements.
• Medical bills to be used in settling any disputes with providers and payers (6 years if tax related)
• Insurance policies once expired.

Keep for 6 Years: 

• Tax records that are not otherwise kept in your "forever" classification.
• Bank statements and reconciliations.
• Tax related medical bills.
• Wage garnishments.
• Sales receipts for significant purchases and for at least while the item is under warranty.
• Accident reports and insurance claims.

Keep Forever: 

• Income tax returns and payment checks.  (Actually, the IRS regs do not require they be kept forever, but we find that you will have other needs for them down the road as well.  Keep you worksheets too.)
• Audited financial statements.
• Legal records.  (Wills, deeds, cancellations of indebtedness, etc. all need to be retained for a wide variety of purposes.)
• Investment trade information.
• Corporate documents and stock records.
• If a business, all use licenses, patents, etc.

Remember that not everything can be put into one of the above broad classifications.  For example, non-tax related credit card receipts need to be kept only as long as it takes for them to be verified on your credit card statement.   Also, computerized records should follow the same retention policies that you adopt but, more importantly, it is critical to safeguard your electronic records with backups and other routines.  It is far easier to lose computer records than paper-based ones.

It is impossible to keep "everything" so you will have to discard records at some point.  It is important to adopt a policy, particularly for a business, but you must 'stick to it' and do your records purges on schedule.