What Do You Do With Old Checkbooks?
Learn the best practices for handling your old checkbooks, balancing security, record-keeping, and efficient financial document management.
Old checkbooks often accumulate over time. Managing these documents is important for organized personal finances and safeguarding sensitive information. Proper handling can prevent security risks and support accurate record-keeping. This guide advises on what to keep, how to dispose of unneeded items, and financial record retention guidelines.
Deciding Which Checkbooks to Keep
Determining which checkbooks to retain is based on their value for financial record-keeping, tax purposes, and as proof of payment. A canceled check serves as evidence that a payment has been fully processed and funds have been transferred. This makes them useful for resolving disputes, verifying payments, and tracking expenses for budgeting. The specific information on a canceled check, such as the payee, amount, date, and endorsement, provides a clear audit trail of the transaction.
For tax purposes, canceled checks can provide proof of charitable donations, business expenses, or other deductions. The Internal Revenue Service (IRS) may request supporting documentation during an examination, making these records valuable. While many banks now offer digital images of canceled checks online, retaining physical or digital copies can simplify record access. In contrast, blank, unused checks from a closed account hold no financial value and represent a security risk if not properly handled.
Securely Disposing of Checkbooks
Safely discarding unneeded checkbooks protects personal and financial information from misuse. Checks contain sensitive data such as your bank account number, routing number, signature, and personal address. Improper disposal of these documents can expose individuals to identity theft and fraud. Criminals may attempt to piece together discarded information, making secure destruction necessary.
Shredding is a recommended method for destroying old checks and checkbooks. A cross-cut or micro-cut shredder cuts paper into small, confetti-like pieces, making reconstruction extremely difficult. For larger quantities, professional shredding services are available, some offering mobile shredding or drop-off options. Other secure disposal methods include burning documents in a controlled environment or soaking them in water with bleach to destroy ink and paper fibers.
Understanding Financial Record Retention
Understanding how long to keep financial documents, including canceled checks and bank statements, is important for tax compliance and personal financial management. The IRS recommends retaining records that support income, deductions, or credits for at least three years from the filing date of a tax return. However, many tax advisors suggest keeping these documents for seven years to cover situations like substantial underreported income, which extends the audit period.
Bank statements and canceled checks used for tax purposes, such as proof of tax payments or deductible expenses, should align with these longer retention periods. For general financial reconciliation, most bank statements can be kept for one year. Records related to property, like purchase or improvement documents, should be retained until the statute of limitations expires for the year the property is disposed of. Digital storage of these records is acceptable, provided they are legible and easily accessible.