Carol McAtee & Associates, CPAS
Tax Records – What to Keep, For How Long, and What to Toss After You File Your Taxes
According to the IRS.gov website, the length of time you should keep a document depends on the action, expense, or event the document records. Generally, you must keep your records that support an item of income or deductions on a tax return until the period of limitations for that return runs out. The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or that the IRS can assess additional tax.
The following list from Consumer Reports may help you determine what to keep and what to toss (remember to shred all sensitive documents before you put them in the recycling bin or trash) once tax season is over:
Documents to keep for a year or less:
- Bank records: Keep deposit and ATM receipts until you reconcile them with your monthly statements. File your monthly checking and savings account statements. After you do your taxes, file any statements needed to prove deductions with your tax records; the rest can be shredded.
- Credit-card bills: Shred them after you’ve checked and paid them, unless you need a bill to support a deduction you’ll be taking on your taxes, such as for a charitable donation (in which case you’ll need to file the bill with your current-year tax records).
- Current-year tax records: Keeping your records organized can save you headaches and money at tax time. Place documents you’ll need for your next return in a file.
- Insurance policies: Keep policies that you renew each year, such as those for your home, apartment, or car, until you get new policies, then shred the old ones.
- Investment statements: You can shred your monthly and quarterly statements from brokerage, 401(k), IRA, Keogh, and other investment accounts as new ones arrive. But hold on to annual statements until you sell the investments.
- Pay stubs: Keep the calendar year’s records until you reconcile them with your annual W-2 form, then shred them. You may actually want to keep your last pay stub of the year as it will contain some information not included on your W-2, such as charitable contributions made through your work place and perhaps union dues.
- Receipts: If you’re not doing anything with your receipts—like tracking your spending, itemizing tax deductions, or using them to return purchases—you don’t need to keep them.
Documents to keep for at least a year:
- Investment purchase confirmations: You will need these to establish your cost basis and holding period when you sell investments. If this information appears on your annual statements, you can keep those instead of quarterly or monthly statements. Store the records until you sell the investments, at which time you should move the back-up records into that year’s tax-return file.
- Loan documents: Keep closing documents for mortgage, vehicle, student, and other loans in a safe-deposit box. You can dispose of them after the loan is paid off.
Documents to archive for seven years:
- Personal federal and state tax returns and their supporting records: These documents must be kept for at least seven years. Remember, your returns can be audited by the IRS up to three years after the date you filed the return. If you fail to report more than 25 percent of your gross income, the government has six years to collect the tax or start legal proceedings—and you can be audited at any time if the IRS suspects you of fraud.
- Tax records: If you do have tax records that are more than seven years old, you may, of course, choose to store them–or even better scan them—for your records.
Documents to keep indefinitely:
- Essential records such as birth and death certificates, marriage licenses, divorce decrees, Social Security cards, and military discharge papers should be kept in a safe-deposit box.
- Permanent life insurance Policies that have a cash value or investment component—keep documents and a list of the companies that issued them and their phone numbers in your safe-deposit box. If you have a term life policy, hold the documents until the term is over, then toss them.
- Pension-plan Documents from your current and former employers and estate-planning documents including wills, trusts, and powers of attorney should also be stored in your safe-deposit box.
Finally, for even more detailed information on record keeping, please see our Record Retention Guide on our website: http://www.accpas.com/taxretention.php
If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.