02 Apr Spring Cleaning – Tax Records
Clutter is frustrating, and springtime is the ideal time to clean out unnecessary mess from your home. Now, in the midst of tax season, it may seem that old tax information is part of the chaos. It can be tempting to trash all these records along with the rest of the mess. But, in fact, that is not a great idea. While there are some tax documents that can be disposed of (and securely shredded), there are many that you should keep. Today, we look to answer a popular spring-cleaning question: which tax forms should be kept?
Why Keep Tax Records Anyways?
To answer this question, turn to the IRS. The IRS suggests keeping receipts, canceled checks, and other documents that support an item of income, a deduction, or a credit appearing on a return as long as they may become material in the administration of any provision of the Internal Revenue Code, which generally will be until the period of limitations expires for that return (source).
To help clarify, here are the periods of limitations of assessment of tax:
3 Years
There is 3-year period that the IRS can audit taxes after they are filed. However, this period begins on the due date for filing. Even if you filed your taxes prior to the due date, taxes are treated as if you filed on said due date.
6 Years
There are special cases in which the IRS can audit taxes for a 6-year period after they are filed. Such a case would include filing your taxes in which you incorrectly report your income and if that discrepancy makes up more than 25% of your gross income.
No Limit
An even more special case that exists in which the IRS can audit your taxes with no time period limitations are when a knowingly fraudulent return is filed, or no taxes are filed at all.
Avoid Audit Issues by Keeping Records
So, if there is a possibility of being audited years out from filing taxes- are there any records that can actually be safely disposed of? Well, of course! While W-2s, 1099, K1, bank statements, and brokerage statements are all extremely important to keep, it is important to remember that they can be kept electronically. If you don’t feel comfortable keeping all your records electronically, consider doing so for older records (3+ years). Then, keep only newer physical copies. This will help you reduce on clutter while still erring on the side of caution.
And if you aren’t totally sold on the idea that digital is the way to go, consider this: one of the key advantages of going digital is that your tax information is better protected from natural disasters (source). Digital files are often more secure than physical files and can help you create more physical space.
Safely Dispose of Records
Do you need help disposing of your old tax records in a secure way? Greenway’s document destruction services are right for your spring cleaning! We protect your sensitive information while practicing environmental responsibility. Plus, our document destruction services are HIPPA-compliant and we always provide a “Certificate of Destruction” for your peace of mind.
Contact Greenway today to start your spring purge and safely dispose of your tax records!