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How long do I save my credit card statements?

By , CardRatings contributor
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Now that the holidays are over and a new year has begun, many people are using the time spent indoors on chilly winter days to declutter and organize paperwork in preparation of tax season. Before you pull out the shredder, it is essential to understand what papers and statements you need to save and what you can throw out.

In the past, people kept all of their important papers in a file cabinet in carefully labeled files, but the papers could be destroyed during a flood, theft or fire. These days many consumers use technology to keep their documentation safe and sound. Many people electronically scan their paper documents and save online versions for future use.

However, technology is not fail-safe. Beverly Harzog, credit card expert and author of "Confessions of a Credit Card Junkie: Everything You Need to Know to Avoid the Mistakes I Made," recommends making sure that you back up your electronic documents by copying the files to a service such as Dropbox, back up on an external hard drive or use an offsite backup service.

"I had a computer crash last year and since I only have online statements, I would have been lost without the backups," says Harzog.

Here are five types of documentation that you need to save, and how long you should keep your various paperwork.

Credit card and bank statements

John Ulzheimer, president of consumer education for CreditSesame.com, recommends saving all bank statements and credit card statements for at least one year. You can save emails with your online statements, you can save screen captures of your online statements or you can scan in copies of your paper statements.

"You can most likely get the statement from your bank or credit card after that, if you need it," Ulzheimer says.

Cardholder agreements

Many people stuff their credit card agreements in a drawer or accidentally toss them. But if you have a question or there is a dispute, having your cardholder agreements on hand can be essential.

"You should also save your cardholder agreements and any changes to your agreements that are mailed to you. They outline your rights and any changes to the terms of your credit card accounts," says Ulzheimer.

Be sure to date each agreement so that you know which one is the latest version.

W-2 forms

Ulzheimer also recommends saving copies of your W-2 each year and holding them until at least retirement age.

"They illustrate your salaries over time, which is used to determine the amount you have paid into the Social Security system," he says. "Don't assume the SSA is going to get it right. You'll receive an up-to-date statement from the SSA from time to time, and you'll want to make sure that they have the correct amounts per your W-2s."

Tax returns

Michael Carney, President of MWC Accounting, says that you must save your federal tax returns for three years since that is the amount of time that the IRS can go back and audit.

"However, the date starts from when you file, so if you file for an extension and file late, then the clock starts from your filing date," says Carney.

Each state has a different statute of limitations which is sometimes different from the federal guidelines, Carney says.

"You need to check the laws for your state before you toss out your state tax returns," he says.

Receipts for expenses and deductions

If you are audited, you will have to justify every expense and deduction. Carney recommends writing the expense, who it was with and the business purpose on each receipt and then scanning it into an online computer folder.

"Lots of people say that they will go back through credit card and bank statements to determine their expenses, but few people actually do that," Carney says. "If you ever find yourself in a position of having to answer the IRS during an audit, it is much better to have proof to support your deductions than trying to remember."

By taking the time to carefully organize and consider each document, you will have all of the necessary paperwork down the road if you are audited or find a discrepancy with your finances. And by saving only the documentation you need, you will have more space in your file cabinet and on your computer's hard drive.

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