Tax Season Extended: How Long Should You Keep Tax Returns
After completing your taxes, you might be tempted to throw your tax records and old tax returns away. However, you should keep them since you might need them if the Internal Revenue Service ever audits you. Additionally, you might need information from the previous year's tax return to do the current tax return. In some cases, you might need information from two or three years back.
How Long to Keep Tax Returns
Most people who receive a W-2 should keep their tax records for three years. You might find that you forgot to claim something and will need to amend your taxes. You have three years to file an amendment.
Three years is also when the IRS goes back if it needs more information or needs to verify what you claimed on your taxes. If you are a freelancer or self-employed, the three-year rule also applies, with one exception: If you sell equipment for your business, such as a work vehicle, you need to keep tax returns for three years after the date of the sale.
If you did not claim more than 25 percent of your gross income for the year, you should keep your tax records. The IRS can come back for up to six years to collect the amount you did not claim. If you filed a fraudulent tax return, this does not apply – the IRS can come after you forever since the statute never expires for fraudulent tax returns.
How Long to Keep Personal Records
You should keep most personal records for up to seven years, depending on the records. Retirement records are those you should keep for up to seven years, while you might keep receipts for a year. Freelancers and self-employed people should keep receipts for up to three years if you claimed those expenses as deductions on your tax returns.
You should keep property records forever. Certain issues could come up many years later, depending on the issue and the state.
Other records include:
- Utility bills, deposit records, and withdrawal records: 1 month.
- Pay stubs and pay statements: 1 year.
- Investment property documents: 3 years after the sale of the investment property.
- Supporting tax documents: Up to 7 years, depending on your circumstances.
- Major financial records: Permanently.
How to Dispose of Tax Records
Many people wonder how to dispose of tax records, including old tax returns. The best way is to use shredding services by Shred America. When using document destruction, you don't have to worry about a criminal getting his or her hands on your records and stealing your identity – or, in the case of a business, the identity of your employees.
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Contact Shred America for Shredding Services
When you need old tax returns and other personal documents shredded, whether you are a business or an individual, contact Shred America to set up an appointment or schedule ongoing shredding services with locked shred boxes.
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