Okay, so we all know that a good chunk of Americans are terrified of getting audited by the IRS. Which can lead to hoarding tax records!
You definitely need to be organized and prepared for any potential IRS audit.
But it’s also okay to pitch records once the appropriate amount of time has passed.
Download the Tax Recordkeeping Guide to follow along!
YEARS TO KEEP TAX RECORDS
If you file a claim for a credit or refund after filing your return, the IRS period of limitations is 3 years from the date you filed your original tax return or 2 years from the date you paid the tax. Whichever is later.
If you file a claim for a loss from worthless securities or bad debt deduction, then you need to keep your tax records for 7 years.
If you do not report income that you should report, and it’s more than 25% of the gross income shown on your return, then you need to keep your tax records for 6 years.
If you do not file a tax return, then you need to keep your records indefinitely.
If you file a fraudulent tax return, then you need to keep your records indefinitely.
If none of the other situations stated above apply to you, then you need to keep your tax records for 3 years.
Keep in mind that these periods of limitations are purely for tax purposes and follow the IRS guidelines. Before disposing of any documents, be sure that you do not need to keep them longer for other purposes. For instance, if your insurance company requires documents to be held longer than the IRS.
Here’s a general list of records you should be keeping along with your tax return.
| CATEGORY | RECORDS |
| Income | W-2 Bank Statements 1099-MISC 1099-NEC 1099-INT 1099-DIV Brokerage Statements Alimony Received K-1 Forms |
| Expenses & Deductions | Receipts Invoices Alimony paid Statements for donations Gambling losses |
| Home | Closing statements Purchase and sales invoice Insurance records Property tax assessments |
| Retirement Accounts | Form 5498 Form 8606 401(k) statements 1099-R Annual statements |
| Other Investments | Transaction data Annual statements |
HOW TO PROPERLY DISPOSE OF RECORDS
There are a few ways to safely dispose of your confidential records, even if you don’t personally own a shredder.
- Use a local paper shredding service.
- Check with your local businesses (banks, tax firms, recycling companies, etc.) to see if they offer a “shred day” as a service to local customers.
- Burn the documents, if allowed in your area.
- An eco-friendlier option is to add them to your compost.
- Soak them in water
- Use multi-cut scissors.
KEEP RECORDS ORGANIZED AND SECURE
Whether you have paper or electronic records, one way to stay organized is to have a separate folder for each tax year.
If you store paper documents, be sure to keep your tax records in a waterproof and fireproof safe.
A safer and more efficient option is to store your documents electronically. You can scan your tax records and store them electronically in the cloud or on an encrypted drive. To keep your information safe, set up a unique password or two-factor authentication.
Follow along for more tax tips this tax season!
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