Showing posts with label Personal Information. Show all posts
Showing posts with label Personal Information. Show all posts

Friday, August 30, 2024

How Long Do You Need To Keep Tax Documents?


Taxes are a lifelong obligation, even after you retire. This makes it important to understand the nitty-gritty of the process, no matter how long you’ve been filing and paying in your life.

Today, we’re talking about documentation. Audits are a dreaded potential with taxes, but you can reduce your risk and lessen the impact—should you get one—by having thorough documentation from previous years. 

But how long do you need to keep tax documents? Learn the IRS suggestion and more information below.

The General Rule: Three Years


The general suggestion from the IRS is to keep tax documentation for three years. This period starts from the date of your tax return filing, or the due date if you file early. The IRS typically has three years to audit your tax return, which is why maintaining records for this duration is essential.

Your tax documents include income statements, receipts for deductions, and other supporting documents. By organizing these records for three years, you ensure that you are prepared in case of any inquiries from the IRS.

Exceptions to the Rule


While three years is the standard, there are exceptions to this rule. You shouldn’t worry about these exceptions if you haven’t filed false or misleading returns, but they’re essential to cover.

For one, if you underreport your income by 25 percent or more, the IRS has six years to audit your return. Secondly, in cases of fraud or failing to file a return, there is no time limit for audits, meaning you should retain documents indefinitely. 

Again, unless you’re guilty of these things, you shouldn’t have to worry about keeping documents for more than three years.




That said, records related to property sales, retirement accounts, or any transactions that could affect your tax obligations should be kept for at least seven years.

What To Do With Expired Documentation


Once the requisite time has passed—whether three, six, or seven years—and you no longer need certain tax documents, it’s important to dispose of them correctly. 

This documentation contains sensitive information that should never be in the hands of unauthorized or untrusted individuals. That means you should never just toss these papers into the trash can and call it a day.

Instead, use various paper shredding methods to protect your personal information from identity theft. For digital files, use secure deletion methods to ensure no recoverable trace remains.

Pro Tip


Maintain a document retention schedule to easily identify which records you can discard and when.

Being diligent about your tax documents helps you navigate this part of your finances confidently even as you enter retirement. 

By understanding how long you need to keep tax documents, you can avoid unnecessary complications while keeping your personal information secure.



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