How Long Do I Need to Keep This Anyway? When To Toss Your Tax Documentation

Tax Returns

If you’re de-cluttering at home or work and come across a stack of past years’ tax returns, your first instinct would be to shred them. After all, who doesn’t like a clean, organized file cabinet? Before you bust out the shredder, here are a few guidelines to keep in mind regarding your tax paperwork.

Three Years

The IRS has a three-year window in which they can select your tax return for an audit, so the safest thing to do is to keep your tax records for at least three years. Here are some forms that should be kept with your tax return:

  • Your 1040 with all schedules, along with any receipts supporting your itemized deductions.
  • Income forms such as W2 and 1099 forms
  • Bank statements, K-1 forms, asset statements such as stocks and bonds
  • Sales receipts for any asset you sold during that tax year.

Since your 1040 form and income forms contain your social security number and other sensitive information, keep your tax records in a secure spot in your home.

If you filed your tax returns online, print out and keep a hard copy. In most cases, it’s best to hang onto your tax return copies indefinitely, especially if you bought or sold assets (stocks/bonds) or real estate.

If you filed a more complex tax return (business, estate or partnership returns for example) you should keep them for up to seven years, particularly if you’re self-employed. Same goes for any supporting documentation for those returns.

Unfortunately, the IRS tends to scrutinize small businesses more closely and tax returns with the Schedule C (self-employment attachment) tend to be more vulnerable to an audit.

Some Exceptions

If the IRS has reason to believe that you have filed a fraudulent return, they can follow up at any time; there is no statute of limitations.

If the IRS also has reason to suspect you deliberately under-reported your earnings by 25 percent or more, they will come calling regardless of how many years have passed.

In other words, play fair and chances are the IRS will leave you alone.

In any case, if you’re not sure how long you should keep your tax records, check with a qualified tax pro who can answer your questions.

Each tax scenario is different, so if you’re purging old paperwork in the name of getting organized, be sure the check with a qualified tax professional before shredding any old returns and supporting records; Googling isn’t enough in some cases.

When in doubt, consult a tax pro who can help you address the sometimes complicated question of “How long do I need to keep this, anyway?”