Once you complete this year’s taxes, you may wonder what to do with that pile of records, 1099s, receipts, and bank statements. The IRS recommends holding on to any documents related to the income you’re reporting or any deduction or credit you’re claiming, including:
- Proof of income, including W-2s and 1099s, bank and brokerage statements, K-1 forms, and spousal support payment records
- Bills and invoices, credit card statements, mileage logs, and cancelled checks
- Financial records related to real property, including paperwork from the purchase or sale of a home and all documents associated with the costs of buying, selling, or managing rental properties
- Investment records related to stock transactions, IRAs, and other retirement accounts
If you’re not sure whether or not to keep a document, err on the side of caution and store it in your files. How long you should hang on to all those documents varies, depending on the action, expense, or event that the document records. The IRS has the right to review all tax returns filed during the Period of Limitations, the time in which you can amend your tax return to claim a credit or refund or the IRS can
assess additional tax. That period is typically three years from the date you filed for any given year.
Some documents should be kept even longer. For example, the IRS recommends keeping employment tax records for at least four years after related taxes become due or are paid, whichever is later. Tax records related to property should be kept until the period of limitations expires for the year you dispose of the property. If you believe you may have under-reported your annual income by 25 percent or more, you should keep your return and related documentation for six or seven years.
It’s recommended that you create digital copies of all your documents. That way, if the printed version is lost or destroyed, you’ll have a backup