If you’re like most people, you have a lot of documents in your home, including old business documents, paid bills, random items, and tax documents from many years ago. While it’s good practice to hold onto important financial and tax documents, you might be wondering how long to keep tax documents, especially if they’ve started piling up and you can no longer hide them away. You may also wonder how to properly store documents when you do have to keep them. If you want to prevent clutter, it’s important to know how long to keep these documents and which you should keep. Not all tax documents need to be kept, and there are other ways to keep track of your tax information without having paper copies.
How Long to Keep Tax Documents
You should keep tax documents for at least three years after the filing date. For example, if you’re reading this in 2022, you should have tax documents going back to 2018 or 2019, depending on whether or not you’ve recently filed taxes. Of course, how long you keep your tax documents depends on the type of file and its importance. For example, income tax returns should be kept for the period of limitations, the period of time when you can still make changes to your tax returns to claim credits or a refund. These documents can also help your financial advisor plan for credit management.
During the period of limitations, the IRS assesses your tax liabilities and refers to years after the taxes are filed. Most experts recommend you keep filed tax return copies no matter how old they are because old documents can help you prepare future returns and do the correct math if you need to file an amended return.
If you’re ever confused about how long to keep your tax documents, talk to your accountant. Depending on your unique circumstances, you may need to keep some documents longer than others. For example, you should keep records for up to seven years if you file a claim for a loss from a bad debt deduction. Meanwhile, you should keep records indefinitely if you don’t file a return or if you have a fraudulent return. Additionally, you should keep employment tax documents for at least four years after the payment due date.
Ultimately, most people will need to keep their tax documents for between three or seven years. However, you don’t need to keep them as physical documents. If you file your taxes online, the IRS will keep records and receipts of your tax payments. Additionally, you can keep digital copies of your tax returns and records of payment from professional tax software. This software will also prevent you from making duplicate payments if you forget that you have already paid your taxes.
Should You Ever Keep Tax Documents for Longer Than Seven Years?
If you’re storing your tax documents digitally, you can keep them indefinitely without worrying about cluttering your home. Most people believe it’s a good idea to have tax records for the rest of their lives just in case they need old information or get audited for various reasons.
Apart from income tax records, you should hold onto documents for your retirement accounts, like IRAs, for at least seven years to be on the safe side. Additionally, in some cases, the IRS statute of limitations is longer than three years, so you have to keep your documents for longer than that in case of an audit.
Which Documents Should You Keep?
Depending on your financial situation, you may have multiple tax documents that you should keep for up to seven years. These may include:
- Mileage logs
- Itemized deductions
- Tax returns
In most cases, keep these documents for three years or longer in case there’s a problem with one of your returns. The IRS has three years to assess your taxes, so if they find something wrong from two years ago, you’ll want these important documents on hand.
So far, we’ve mostly talked about personal income tax documents. However, if you own a property, you should keep all your property tax records for at least three years. These documents may include records for depletion deduction, depreciation, and amortization, which will be used to determine your profits and losses when you sell a property like a house, rental property, or vehicle. Additionally, if you used online loans to purchase property or other investments, this will not be included in your taxes. However, if your loans are forgiven, the amount will be included in your overall income.
When Should You Get Rid of Tax Documents?
Ultimately, it’s best to never get rid of these documents because they’re important financial information you may need for the rest of your life. At the very least, they can ensure you’re protected if the IRS decides to audit you. If you don’t want to keep paper copies at your home, you can scan all of your tax documents and put them in a folder on your computer or in the cloud so you’ll have access to them for as long as you need them.
You can also put copies in a fireproof safe with other important financial documents like your house deed, will, and mortgage and insurance information. However, that’s not always necessary. Luckily, the IRS keeps tax returns, so you can access them online by creating an account. However, they do not have access to your profit and loss statements or income documents, so it’s a good idea to keep those for at least three years and digitize them so they won’t cause clutter.
What About State Tax Documents?
You need the same documents for federal and state tax documents, so luckily, there’s nothing more you’ll need to keep to correctly track your state tax payments. However, depending on where you live, your state may not provide access to past tax returns, so you must digitize them as soon as you get them to prevent yourself from losing them.
Before throwing away any tax documents, talk to your accountant or tax advisor. Depending on some circumstances, you may be required to keep your tax documents for longer. Additionally, your state’s tax agency may have a different time frame to audit your taxes than the IRS, so you should double-check to ensure you won’t need any tax information you choose to throw away.
Ashley Nielsen earned a B.S. degree in Business Administration Marketing at Point Loma Nazarene University. She is a freelance writer who loves to share knowledge about general business, marketing, lifestyle, wellness, and financial tips. During her free time, she enjoys being outside, staying active, reading a book, or diving deep into her favorite music.