Tax documents you should save
You may only want to keep some of your paperwork after filing your tax return, including your W-2, 1099s, and other receipts. It’s safe to say you don’t want to think about taxes at all. But don’t toss them out as soon as you mail your tax return or submit your electronic forms.
The Internal Revenue Service recommends that taxpayers should keep their documents for three years after the date of filing; after that, in most cases, the statute of limitations for the IRS audit expires.
However, remember that this time frame does not apply if the IRS believes you did not file a return. If you receive a notice claiming that you never filed, it is your responsibility to prove otherwise. You must keep a copy of your return and proof of filing to prove your case.
You should keep a registered or certified receipt if you filed a paper return. You can also save the delivery slip from a private delivery service like FedEx.
The IRS accepts the email acknowledging your return was accepted for filing from anyone who files electronic returns. If you file using software (such as TurboTax), you will receive an email from the provider.
Step 1. How to Keep your Documents Save
Create your organizational system.
Choose one location to keep all of your tax information. This could be a folder, an online system, file boxes, or whatever works best for you. Your system should be simple to use and accessible.
Many people prefer to keep documents in a filing cabinet. File folders can be used to organize paperwork by subject, year, or any other method you choose. Bankers’ boxes are another option for storage, but they are more vulnerable to water damage.
There may need to be more than a standard filing cabinet for your most important documents. A home safe could be a better option. For maximum security, look for a fireproof and waterproof safe.
Keeping all your documents on your computer is inefficient and can cause your system to slow down. External hard drives, such as HDDs and SDDs, are the ideal solution for storing massive amounts of electronic data and are another option for digital storage. Storing electronic paperwork on a flash drive is an even more compact solution, though flash drives are also more easily misplaced or damaged.
If you go the digital route, you should make multiple backup copies in case one of them becomes damaged or fails.
Make a list of documents to save and protect.
Make a list of documents and papers you might need for future tax seasons. Reading through previous years’ tax returns is the best way to start your list. When it comes to taxes, keep all tax records for at least seven years. The IRS audit statute of limitations is three years. However, in some cases, they can go back as far as six or seven years.
Your best bet is to keep your tax returns for as long as possible. You’ll have all the information you need if you ever face a tax audit. You should also keep documents that verify the information on your returns, such as W-2 and 1099 forms, receipts, and payments, for at least seven years. Keep receipts for assets, such as receipts for home remodeling projects, for as long as you are the owner.
W-2s, 1099s, rental income documents, and student loan forms are examples of income documents. The IRS recommends keeping these types of forms until the return’s limitation period expires.
Property taxes, mortgage interest, student loan interest, business expenses, health care and medical expense information, and other expense-related tax forms are examples of expense documents. Documentation for student loans should be kept until all payments are made. Before throwing away forms related to health care and medical expenses, check with your insurance provider.
Learn How to Get Rid of Outdated Financial Records
If you dispose of documents with your trash, anyone who is willing to do some dirty work to steal your identity will have access to your information. Your old bills, statements, voided and canceled checks, and other financial records may contain more information than you realize.
The best course of action is to shred any documents containing confidential information before throwing them away. Either purchase a home shredder or hire a company that offers secure document destruction. This service will cost you money, but it’s a small price to pay for the security of your personal data.
A financial life inevitably involves substantial documentation, including monthly bank statements, insurance records, and various tax filing materials. You can reduce the number of materials you gather over time by understanding what must remain and what can be removed at any time.