The IRS recommends keeping tax records for 3-4 years after filing, but some experts suggest keeping them for 7-10 years. Keeping W-2s may be important for Social Security benefits and tax records may be needed for student loans or business disclosure.
There is a lot of controversy about how long you should keep tax records and what should be included in those records. Is it enough to keep a statement or do you need to keep copies of W-2s, expense receipts, and any forms filed in addition to your 1040 or business tax reports? You will find many different answers if you ask this question online.
The IRS recommends that you keep tax records and documentation for three to four years after the filing date. They change this statement if you owe money that you cannot pay right away. If you owe back taxes or are making payments on them, then the IRS suggests that you keep your tax records for four years after the last payment. They acknowledge that some companies, individuals, and the like might want to see their records for years prior to the four-year date.
There is a problem with the IRS suggestion. They have ten years to find errors on your taxes and collect any amounts you underpaid. The IRS generally won’t look that far back, so some financial experts suggest that you keep tax records, receipts, W-2s, and other forms for seven years. This compromise seems a bit silly. If the IRS can technically call you to account for the taxes you filed ten years ago, it would seem prudent to keep the forms, and others, for ten years. Even if you’re not likely to need a return ten years sooner, it would be nice to have that information if you ever need it.
Others differ and feel that tax records should always be kept. This suggestion may make some sense, especially in W-2 maintenance. The reason you might want to keep W-2s is made clear when you receive annual reports about the amount of Social Security you may be entitled to when you retire. If you have paid more social security than the Social Security Administration estimates, you may be entitled to slightly higher retirement benefits. At a minimum, plan to check W-2 or 1099 misc. forms against Social Security Reports to make sure you are not shorting.
Tax records may be needed for a number of things. When applying for student loans or financial aid for school for yourself or your children, you may need to submit copies of a couple of years’ worth of statements. If your tax documentation is for a business, you may need this information to make full disclosure to the public. It is better to err on the side of caution and keep records longer than you need to. A simple two-drawer filing cabinet will hold records and related documents very well, and is a reasonable investment for you to keep your records safe.
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