What Documents to Keep and for How Long

What Documents to Keep and for How Long

Daniel de Visé, USA TODAY  Wed, December 25, 2024

Can I just throw out those old documents in my basement? We asked accountants.

As you ransacked your basement in search of holiday decorations, perhaps you came upon boxes of documents from the last millennium. And then, you probably asked yourself: “Couldn’t I just throw these out?”

Companies and governments often have document retention policies. Most people do not.

Common wisdom suggests we keep important papers for seven years, for reasons that, we vaguely recall, have something to do with taxes.

For those of us with paper records dating to the Clinton Administration, that would seem to mean you can throw them away.

But does that mean everything?

We posed those questions to accountants and tax experts. Here’s what they told us.

Tax returns

Let’s start with the tax return, a near-universal document that fulfills our annual duty to Uncle Sam.

“The IRS can audit you for no reason, or any reason, for three years from the date you filed your return,” said Paul Mendelsohn, a CPA in Livingston, New Jersey.

“The IRS has more time,” beyond the three years, “if you pay late, file an amended return, file a fraudulent return or leave out income that is at least 25% of what you reported,” he said.

The seven-year rule exists, in part, because the IRS “typically has up to six years to audit your return if there’s a big issue, like unreported income,” said Mark Gallegos, a CPA in Chicago. The seventh year “is just a buffer.”

There are cases, though, in which even seven years is not long enough.

Example: There is no time limit for going after people who file a fraudulent tax return, or no return at all.

“If you never filed a tax return, the statute never starts, so you’d have to keep records indefinitely,” said Scott Brillhart, a CPA in Chicago.

Bottom line: Keep your tax returns for at least seven years, if not forever.

Tax supporting documents

The documents you file with your tax return or use to prepare it, including W-2 forms, 1099s, receipts and expense records, “can usually be tossed after seven years,” Gallegos said.

In fact, most of us won’t need the supporting documents for more than three years, Mendelsohn said.

And so, at a minimum, keep those records “for three years from the date you filed your original return, or two years from the date you paid the tax, whichever is later,” he said.

Bottom line: Keep supporting tax documents for at least three years, and ideally for seven.

Bank and credit card statements

TO READ MORE:  https://www.yahoo.com/finance/news/just-throw-those-old-documents-100545204.html