Tax Time Shredding: What to Shred, What to Keep

Bank statements should only be kept for one year unless you think you may be applying for Medicaid. Many states require that you show five year's worth of bank statements.

Credit card bills can be shred unless you are using them to verify a purchase that is relevant to a deduction.

Tax returns/supporting documents: Despite being able to amend your tax returns going back three years, the IRS has seven years to audit your returns if the agency suspects you made a mistake, and up to six years if you likely underreported your gross income by 25 percent or more. As a result, you need to hold on to your returns and all supporting documents for seven years. After that period, older returns can be safely shred.

Retirement account statements including 401(k), 403(b), 457, IRA, Roth IRA, SIMPLE, PSP and Keogh. Keep notices of any portfolio changes you make intra-month (or intra-quarter for some plans) until the subsequent statement arrives to confirm those changes. After making sure the statement is correct, you can shred away. One note: keep evidence of IRA contributions until you withdraw the money.

Brokerage and mutual fund account monthly statements/periodic trade confirmations (taxable accounts): Retain confirmations until the transaction is detailed in your monthly report. For tax purposes, flag a month where a transaction occurs, because you may need to access this information in the future. Otherwise, shred monthly statements as new ones arrive, but keep annual statements until the sale of each asset within the account occurs and for 7 years thereafter, in case you get audited.

Pay Stubs: Keep for one year and be sure to match them to your W2 form, before you shred.

Medical Records: Given how hard it is to deal with health insurance companies, you should keep medical records for at least a year, though some suggest keeping records for five years from the time treatment for the symptoms ended. Retain information about prescription information, specific medical histories, health insurance information and contact information for your physician.

Utility and phone bills: Shred them after you've paid them, unless they contain tax-deductible expenses.

Some tips for finding a personal shredder for tax time

1. For purging a lot of old tax records you may want a shredder with longer run time, so you don't need to wait for the shredder to cool down.
2. If you are shredding a lot at home, a quiet performing shredder may be necessary, especially after the kids go to bed.
3. A shredder at home also raises the risk of injury, especially during tax time when the paper shredder is in frequent use. Make sure you find a shredder with safety features to protect kids in the house from accidents.

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