In response to many requests of what tax records should be kept and how long, we have prepared the following list for your reference based on Federal Laws.

Income tax returns and supporting documents – Keep at least 4 years and preferably 7 if space is not critical. Once this period has elapsed, the documents can be discarded, but the returns themselves, which do not take much space, should probably be retained indefinitely.

Residential property records – All escrow statements (purchase and sale) plus receipts for improvements should be kept for at least 5 years after property is sold. (Including refinance papers)

Purchase receipts for stocks, bonds, mutual funds – These should also be kept for at least 5 years after the asset is sold. This would include record of stock dividends, splits and reinvested dividends.

Depreciation records – For any rental real estate or depreciable business property you own, keep records of the property’s cost, date acquired, and schedule of depreciation claimed in previous years. This record should be kept until 5 years after the property is disposed of.

Retirement plan contributions – Records of non-deductible IRA deposits, employer plan stock purchased, rollovers, and Keogh plan deposits should be kept until 5 years after the plan assets have been withdrawn.

Personal records – Important papers such as estate and gift returns, divorce and property settlement agreements, deeds, title insurance policies, and all trust documents should be kept in a permanent file, or perhaps a safe deposit box.

Miscellaneous papers – All other documents to include bank statements, canceled checks, credit card statements, deposit slips, charitable contribution receipts, and medical bills can be discarded after 5 years.

This Action Plan requires five steps:

1. List your regular monthly bills, such as your mortgage or rent, car loan, utilities, phone, Internet service, cable TV, credit-card bills (and any interest you pay, too), insurance premiums and child-care expenses.

2. Track your out-of-pocket spending for a week. Keep track of all the money you spend for a week on groceries, gas, meals, clothes, entertainment, personal items, and even sodas and snacks, which can all add up. Keep a small notebook with you, use this expense chart or just collect the receipts during the day and add them to the list in the evening. Keep track of all expenses for the week, whether you pay for them in cash or use a debit card, credit card or check.

3. Review the numbers. Now that you can see how you’ve spent your money, look for ways to save. Some strategies may be simple, like cutting back on meals out or using in-network ATMs to avoid fees. You may also want to make bigger changes that can save more money, such as cutting back on your cell phone package or dropping cable TV.

4. Review your big-ticket expenses. After you’ve reviewed your regular expenses, it can also help to review your big-ticket bills for the past year—the special expenses such as home improvements, car repairs, travel, education, furniture and electronics. These bills don’t crop up every month but can make a big difference in your finances—and can land you in debt if you aren’t prepared. Go through your credit card statements, bank records and receipts to list the cost of these items. If you don’t have good records of these expenses from the past year, start keeping a log of them from this point forward. Looking at these irregular costs will help you plan better for emergencies and other unexpected bills.

5. Create a plan. Review all of your expenses for ways to cut back, then decide what to do with the extra money. Set specific goals, such as building an emergency fund, paying off your credit-card bills, or increasing your retirement savings.