You’ll want to keep supporting tax documentation for as long as the statute of limitations runs. Here’s the lowdown on tax document retention.
As the deadline to file 2016 taxes looms, it’s a good time to think about your past tax documents and figure out what you should keep and what you should shred. If your older tax records are buried under a pile of papers in a dusty drawer, it’s probably time to do a little organizing. Here’s a list of how to sort, organize, and deal with your tax paper clutter.
Tax Document Retention
You should keep every tax return and supporting forms. This includes W-2s, 1099s, expense tracking, mileage logs if you itemize, and other documents. As for your filed tax records, the IRS suggests that you “keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.”
For example, if you filed your 2014 tax return on February 1, 2016, you should have kept the return and supporting documents until at least April 15, 2016.
You should also hang onto bank statements for a period of 3 years if you’ve been audited by the IRS. Most banks provide online statements that you can download and save to your computer if you prefer to save some space in your home or office.
Some Exceptions to the Three Year Rule
For retirement accounts, such as IRAs, you must hang onto these until seven years after the account is completely closed.
Real estate and other investment records should be retained for 3 years for capital gains tax purposes. However, if you amortize, depreciate, or buy or sell property, you should keep property records until the statute of limitations expires for the year in which you dispose of the property.
Some creditors and insurance companies may require you to keep records longer than the IRS states, so check with your respective creditors to make sure you’re not tossing documents you should keep.
For Businesses, Tax Record Retention Is a Bit Different
If you have employees, the IRS suggests that all employment tax records be retained for at least 4 years after the date which the taxes were due or were paid, but only for whichever is later.
For ledgers, there is a mixed professional opinion on how long to keep these. While there are many tax officials who will lean towards keeping these permanently, for supporting documentation, like accounts payable and receivables, these should be kept for a minimum of 7 years. Canceled checks should be kept for the same amount of time.
When it’s time to get rid of old tax documents, don’t just toss them in the trash! Improperly disposing of sensitive documentation can lead to potential security breaches that puts corporate security at risk.
Legal Shred is an expert in tax shredding laws and can assist business owners and residents in properly destroying old tax documents. With mobile and offsite shredding options, Legal Shred offers expert privacy, thereby mitigating any and all security risks.
It’s time to make room for the new tax year by properly shredding your old tax documents. Contact Legal Shred for a quote today.