Document Rention Rules and Shredding

Congratulations on completing your taxes. Hopefully it did not come along with a large amount due. But it likely came along with a large folder of documents. Some you needed for taxes this year, some may be later in future years, and some can be shredded today.

Many people are confused about what to retain and what to shred. Here is a more complete list for record retention but I would like to focus on investment papers. The confusion here is understandable. In 2011 the rules for calculating the tax basis changed.

The new rules require brokerage houses to provide the cost information for stocks starting in 2011. In 2012 they need to provide the same information for mutual funds. Then in 2013 the same information will be provided for bonds and the other securities.

But before you go and start shredding all of your brokerage statements you will want to confirm that they are providing the information you need. They are not required to keep the information from prior years.

A good place to start is to keep end of year statements and transaction reports that list the purchase of any investments. You can shred the monthly statements once you have reviewed them. You can shred any prospectus or other marketing material your broker sends out.