Tax documents can be some of the most confusing when it comes to what to keep and what to shred. The standard rule is keep records for three years, but does that apply to everything? The answer is that it's more complicated than that. Some documents you only need to save for a year while others you may need to keep around for a decade or longer. For example, your pay stubs and brokerage statements really only need to be kept unless there's a discrepancy in your W2s, year-end statements, or 1099s. In addition, there are certain income-related forms that aren't necessary for an audit, but are necessary for other benefits (e.g., Social Security, etc.). Find out more about how to create a tax document checklist for yourself, so you don't leave anything out.
Tax Document Retention Schedule
Here are the most important time limits to note as you go over your taxes:
3 years: Anything that shows how you made and spent income, including dividends, capital gains, and interest, should be kept for at least 3 years after you've filed. If you're filing late, you'll need to keep it for three years from the filing date. W2s, 1099s, 1098s, charitable contribution receipts, eligible expenses, retirement-savings plan contributions are all records you should keep.
6 years: If the IRS believes that you underreported your income by at least 25%, auditors have the right to look into your tax history. It's not always easy to determine if you'll fall into this category, but it's generally reserved for self-employed people or for those whose assets clearly do not match their income.
7 years: If you choose to write off a security or a bad debt, you have seven years to do it. But you must have proof to show the losses. Sometimes it takes a while for stocks to reveal themselves as poor investments, so hold off on shredding these for a while.
10 years: Those who pay taxes to foreign governments may be able to file for a benefit for up 10 years after filing. This could either come in the form of a credit or as a deduction. If you do choose an amended return at some point down the line, it can be a major financial boon.
Shred Your Old Returns
There are so many reasons to use document destruction when you're through with your old returns. For one, too many people allow their tax documents to build to the point of absurdity. They think they'll get around to clearing it out next year, but then continue to put it off. Not only can shredding help you organize your affairs, but it can also be the identity theft protection you need to stay safe.
Contact Heart Of Texas Shred
If you're in need of shredding services, let Heart of Texas be the identity theft prevention you need during tax season and beyond. A reputable shredding company can get rid of everything in such a way where it can't be put back together again, no matter how motivated a criminal happens to be. We can assist with one-time purges, monthly shredding, or even weekly services. Give us a call today to learn more about just how effective we can be.