The Daily Deduction

How Long Do I Need to Keep My Tax Records?

 

4-30-13_FileCabinet 

 

 

If you’re like me, the desk in your home office has at least ten trees worth of paperwork sitting on it.  Part of my Spring Cleaning initiative this year is to find the desk again (I think it has a cherry wood surface!) and get rid of all the old documents that are starting to make my file cabinet bow.

It’s a good idea to know what to keep,  especially when it comes to tax records.

According to the IRS, individual taxpayers only need to store records for as long as the period of limitations applies.  Basically, if there is still time left on the clock to amend a return from a previous year, keep your records for that tax year.

Here’s what the IRS timetables look like:

Period of Limitations 

 

IF you… 

THEN the
period is…
 

1 

Owe additional tax and
(2), (3), and (4) do not
apply to you

3 years

2 

Do not report income that
you should and it is more
than 25% of the gross
income shown on your
return

6 years

3 

File a fraudulent return

No limit

4 

Do not file a return

No limit

5 

File a claim for credit or
refund after you filed
your return

The later of 3 years or 2 years after tax was paid.

6 

File a claim for a loss from
worthless securities

7 years

Storing Tax Records 

I’m a big fan of doing an electronic back up tax records, just to keep the desks, cabinets, and other storage spaces (see also: bookshelves and toy trunks) clear.  Paper copies are perfectly acceptable as well.

  • Scan and save your paper copies:  Pile all of your tax records for the year in one pile, load it in the top tray, set your multifunction device to save to an external hard drive (connected to the multifunction scanner through USB) and get back to your normal life.  Depending on which multifunction machine you have, you should have the option to save the whole stack as one PDF, or save each individual document as separate files.  Don’t forget to set your document naming prefixes.  My naming convention resembles the tax year that the document is from.
  • Cloud Storage: You never know when an institution is going to ask for your tax information from a previous year.  To cut back on time, you can save all of your tax documents on the Cloud so you can access them anytime, anywhere.  Examples of Cloud Storage:  Google Drive, iCloud, Dropbox, Box, and Amazon Cloud Drive.
Posted To: The Daily Deduction By: Lauryn on 5/1/2013 11:36:30 AM
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