The fear of being audited might lead many people to stash an unnecessary amount Read this article of paperwork. Keeping accurate tax records helps to ensure compliance and provides evidence in case of an audit.
Here are some things to consider when deciding what tax documents to keep. And remember, it’s always best to refer to official IRS guidelines when in doubt or to verify that your record-keeping plan is correct.
How Long to Keep Tax Returns
Sending off your tax payment does not mean the end of your responsibility for that year’s tax paperwork. Should the IRS or state tax authorities raise questions about deductions or reported losses after you file your return, having access to your tax return and documents like W-2s can help you prove the accuracy of your filings. The general recommendation is to keep your returns and any supporting documents for three years after you file or the tax return due date, whichever is later.
Digitize Your Financial and Tax Records
The IRS accepts electronic records, so there’s typically no reason to hang on to a statement or other piece of paper just because it was issued by your bank or other financial institution. Scan the originals to a digital format or consider going paperless by getting your statements electronically.
Make sure you backup your data and consider keeping a copy off-site, either in physical form (such as on an external hard drive) or encrypted in the cloud.
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