With tax season in full swing, I have been fielding some questions regarding how long account statements and the like need to be retained. After doing some research, the consensus I’m seeing is that anything that verifies information on your tax return should be retained for at least six to seven years. Items that fall in this category include W-2 forms, 1099’s, trade confirmations, and bank and brokerage account statements.
Trade confirmations and account statements are useful for documenting what you paid for a security, what you sold a security for, and dividends and interest earned. While much of this information is typically included on 1099s, it is particularly important to keep your original records documenting purchases. Many financial institutions provide an annual summary at the end of the year. In this case, there is no need to retain all of the monthly statements as this information is captured in the annual summary. Investors should retain their trade confirmations if purchase and sale information is not included on their annual summary (which is unlikely, but good to make sure).
If you do not receive an annual summary from your brokerage firm, I recommend retaining your December statements and all trade confirmations.
You should retain annual summaries indefinitely (or trade confirmations if you do not receive a comprehensive annual summary) as you could purchase a position and hold it a very long time, well beyond six years. Should the position be sold at some point in the future, it is important to have a record of what was paid for it and when it was purchased.
Remember that with retirement accounts there is no need to track purchases and sales for tax purposes since these are tax-deferred accounts, not subject to capital gains taxes. With Individual Retirement Accounts (IRAs), it is wise to retain your December statements as these will reflect any contributions or distributions made over the course of the year, as well as any tax withholding.
Glenn S. Rank, CIMA®
Certified Investment Management Analyst®