After you submit your tax return, you may wonder what you should do with all of the documents needed to file your taxes. You realize that some paperwork should be kept on hand for while, but you may not know what documents to keep and for how long you should retain them. You can simplify your record keeping and avoid compiling heaps of unneeded paperwork by using these guidelines after filing your taxes each year.
Paperwork to Keep for a YearSome documentation does not need to be kept for more than a year. Papers to file for a year's time include income statements like:
- Bank statements
- Brokerage statements
- K-1 forms
- Utility bills if you claim a home office deduction
- Canceled checks
- Credit card receipts
- Annual Social Security statements
Papers to Retain for Three YearsUnder normal circumstances, you only are required to keep your tax returns on hand for three years. The IRS typically will only contact you about returns that are filed and for which you owe no additional taxes within a three year period.
However, if you owe additional taxes or if you failed to claim more than 25 percent of your income, you should hang onto those returns for six years. If you filed a fraudulent claim or failed to file a return at all, you should hang onto your tax records indefinitely, as no time limit exists for the IRS to pursue fraudulent claims.
Other paperwork that should be kept for three years include documentation for:
- Medical bills
- Canceled insurance policies
- Home sale records
- Stock sale records
- Receipts or canceled checks to prove tax return income or deductions
- Annual investment statements
Documents to File and Keep for Seven Years or LongerSome types of documentation should be kept longer than three years. For example, the IRS may have questions about any loans that you have paid off in entirety for up to seven years after you satisfied these debts.
Other documents should be kept indefinitely, such as your:
- Marriage license
- Divorce decree
- Birth certificate
- Last Will and Testament
- Children's adoption records
- Immediate family death certificates
- Paid mortgage receipts
If you have questions or want to know more about why you should retain these papers for the prescribed time limits, you can get this information by referring to IRS Publication 552.
Keeping Your Tax Records Safe
It is important that you know how to keep these documents safe in case they are ever needed to file amended returns or to explain previous tax filings. You ideally should store these papers in a safe deposit bank at your bank or credit union.
If you prefer not to buy a safe deposit box, you may invest in a fireproof vault or deposit box for your home. You can find these boxes for sale at any retail store.
You also would do well to make copies of the records and even upload and store these documents electronically. Cloud storage has proven to be one of the safest and most cost effective ways to safely file and keep sensitive financial paperwork.
A host of different paperwork is required to file your taxes during any given year. You can make sure you have the right records on hand by knowing what papers to keep and for how long you should retain them.