How Long Should You Keep Your Tax Records

People are often at one end of the spectrum or another – they either keep tax records forever or throw them away as soon as they do their taxes. If you're in the former category, it's time to go through all of those old records and shred those you don't need to keep. If you're in the latter category, you need to keep your tax record for up to seven years.

What Tax Records You Need to Keep

You need to keep certain tax records if you have to do an amended return or the Internal Revenue Service audits you. Keep ordinary receipts for small purchases for a year. Otherwise:

• For three years, keep bank statements, receipts for deductions, old tax returns, and supporting documentation for the current year's tax returns.
• For four years, keep employment tax records after the date you paid the tax or after the due date for the tax, whichever is later.
• For six years, keep records for any income that you did not report.
• For seven years, keep canceled checks, payroll vouchers, and records from filing a claim for a bad debt or worthless securities. If the canceled check is for an important transaction, such as paying off a large loan, keep those permanently.

You should keep some documents permanently, including depreciation schedules and records for returns that you never filed. If you filed a fraudulent return, you should also keep those records permanently.

How Long to Keep Personal Records

Since the IRS can audit you for up to three years, it's best to keep most personal records for that long. However, you can get rid of some personal records, such as receipts for minor purchases, unless you need those records to prove your itemized deductions and depreciation. You should keep real estate records for as long as you own the property.

If you are not sure as to whether you should keep a document, keep it. You can scan it into a file on your computer and then shred the paper document, or you can store such documents at our storage facility.

How to Dispose of Tax Records

If you have several boxes of records to go through, separate the files first. Files that you know you don't need to keep should go in one pile. Files you know you need to keep should go into another pile. Files that are questionable or have mixed documents should go into a third pile.

First, look through the files you think should be discarded. Make sure you do not have documents in them that you should keep. As you go through them, the files you know you will destroy into a document destruction box.

Next, go through the "maybe" files. Put any documents you know that you will destroy into the box. Create new files for those you need to keep or merge them with your "keeper" files.

You can get rid of:

• Bank statements over three years old.
• Canceled checks over seven years old, unless they are for important purchases.
• Payroll vouchers that are over seven years old.
• Any supporting documentation for your taxes that you do not have to keep longer or permanently.
• Old utility bills.
• Old receipts.
• Extra copies of documents, including important documents – you need only one copy.
• Expired schedules and insurance policies.

Contact Gilmore Services

After you go through your documents, don't just throw them in the trash. Contact Gilmore Services for an appointment for shredding services.