What do I need to keep?
You have filed your tax return. Phew! That project is over for another year. Now what do you do with all the resulting paper?
Keep it for seven years.
Hold on to any paper relating to your tax return. If for some reason the IRS audits you, you will need to have the back-up documents supporting the numbers you reported on your return. The IRS has up to three years to audit a return, six years if it identifies a substantial error. Most tax professionals thus recommend keeping tax returns and the supporting documents for seven years.
Supporting documents include W-2s, 1099s, donation receipts, and all other papers that prove income, credits and deductions.
Store your tax returns and their supporting tax documents together in an easy to reach place. If you scan and store them electronically, be certain they are backed-up and secure. Should the IRS mail you a notice it is auditing you, you want to be able to quickly retrieve the information.
Here are some specific tips:
- Photocopy any thermal paper cash register receipts. The ink on these fade and in a few months will be unreadable.
- Unless you have a home-based business and are deducting utility expenses, you can shred these bills. If you ever need a copy of a bill, the utility company will provide it.
- You only need to keep medical bills and receipts if you deducted medical expenses on your return or you paid medical expenses from a Health Savings Account.
- Most credit card and bank statements can be shredded. Keep any individual statement that backs up something on your tax return, such as a charitable donation if you don’t have a receipt from the charity.
- If you earned at least $10 in bank interest, the bank will send you a 1099-INT and you can shred your bank statements. If you earned less than $10, however, keep only your December statement as it states the total interest earned that year.
As you put away your 2014 tax return and documents, you can pull out the ones from seven years ago and send them through the shredder. Keep only what you need to cut down on clutter.
