Tax Record Retention: How Long Should You Keep Tax Records?
Especially in today’s climate with hard copies of sensitive data being so risky. Here’s what you should know about keeping tax records.
Tax season is now in full swing and people across the U.S. are compiling all the receipts and paperwork necessary to report their earnings. Whether you work with a professional tax preparer or handle the job on your own, one thing we all think about is how long we need to keep these records laying around for proof. Here is everything you need to know about tax record retention.
The IRS recommends keeping tax records for 3-7 years. The amount of years you should hold on to your tax records and related documents can depend on various factors and statues but typically fall anywhere between three and seven years.
You should understand the rules and limitations required for your business that could extend the time period for when you would be audited. Tax record retention periods vary based on a number of factors. Typically if an audit of your tax filings happens, it will be within three years of filing. If you think you may fall under the underreported income rule, you’ll want to be sure to hang on to them for a little longer in case an audit comes along.
In addition to needing your tax documents from the previous year to be able to file the current years, there are some other reasons why you might want to keep them handy too. For example, if you plan to buy a house in the coming year or will be requesting student loan services, it will save you lots of time by having your tax data on hand when filling out the applications.
Other documents used to file tax and compile the number you’ve arrived at for your income should also be saved. In particular, any documents that prove bad debts of losses that occurred in the tax year.
After you’ve met all of these stipulations and you have documents that can be tossed, do so wisely. Even if the records are several years old, they still contain personally identifiable information such as name, social security numbers and birthdays. This is what fraudsters use to perpetrate some of the simplest and most sophisticated attacks of our day.
A professional paper shredding company can protect your data and destroy it so it is no longer accessible by anyone. Legal Shred gives you peace of mind knowing your tax documents are shredded, recycled and incinerated in compliance with all regulations.
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