Keep tax documentation for at least seven years, including W-2s, but discard accompanying materials like receipts and interest income statements. Retain some tax documents for more than ten years to prove eligibility for retirement income.
It’s often hard to know when you can get rid of personal records, like tax paperwork. Also, it can be difficult to know which parts of one’s tax paperwork you need to keep. For example, is it necessary to keep receipts for itemized deductions or statements of income earned after tax documentation has been filed?
It makes sense to understand how and when the IRS or individual states can investigate tax returns. The following rules apply. The IRS can challenge your tax returns for up to three years after they are filed. They have six years to review your tax documentation and audit it if they discover you have unreported income. Therefore, it makes sense to keep tax documentation for at least seven years.
Later, you may still want to keep the actual returns, but the accompanying materials, such as receipts, W-2s, miscellaneous 1099s, and interest income statements, can usually be discarded. This tax documentation should not only be discarded, but shredded to prevent potential identity theft. Many of these documents include important information like your social security number, which makes it very easy for a thief to steal your identity.
There are a few reasons why it might make sense to retain some tax documents for more than ten years. For example, W-2s list money paid into social security. If you’ve always contributed a maximum amount to your Social Security payments, and after retirement the government offers you less than you’re actually entitled to, you can use your old W-2s to show your eligibility for more money. Mistakes can happen, even in government, so having a way to prove your eligibility to receive retirement income from the state can be valuable.
What you can definitely do is get rid of things like quarterly statements and pay stubs once you’ve received W-2s, 1099 miscellaneous forms, or year-end statements. You do not need to keep this additional tax documentation, as it duplicates the information you already have in your possession. Also, if you need to see a past tax return and don’t have one, you can request one from the IRS. Remember to keep this on file for at least seven years, after your original filing date.
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