Investors in stocks and mutual funds eventually find themselves with files stuffed full of paper records relating to their investments. Some of those papers are important and must be retained, while others can safely be tossed away. Year-end statements for your brokerage and mutual fund accounts are among the important records to be retained.
About Annual Statements
Brokers and mutual funds must send year-end statements by the end of January each year summarizing account activity and the final standing of your accounts on the last business day of the year. Once you receive your annual statement, you should review it against your monthly statements to verify it is accurate. Then you can discard the monthly statements.
Keep your year-end stock and mutual fund account statements in your tax files for three years. If you are self-employed, you need to keep the annual statements for six years. The Internal Revenue Service normally doesn’t examine tax returns more than three years old for most taxpayers, or six years for those who are self-employed. You also have three years after you file to amend your tax returns to claim a refund.
Keep the statements showing stock and mutual fund share purchases, reinvested dividends and capital gains distributions for as long as you own the shares. You will need these records to establish your cost basis when you sell your shares. You will also need them to claim the reinvested-dividend tax deduction and the lower tax rates on capital gains when you sell the shares. If you have securities that became worthless, you should keep those records until you claim the loss on your taxes. You have seven years to claim the loss.
The Internal Revenue Service permits you to keep your statements in electronic format. An electronic record storage system must be able to index, preserve, retrieve and reproduce an accurate copy of your investment records. The IRS retention guidelines for electronic investment records are the same as for paper records.
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