Tax Tips For Individuals: Tax Record Retention

“How long do I need to hold on to these?”

As one financial year ends and the next one looms on the horizon, you may be making space for the paperwork to come. This means sorting through piles of paper documents or external hard drives. You’d probably wondered repeatedly how long you need to hold on to your documents.

How do you know how long to keep tax or other documents, or whether to go ahead and shred? Here are a few tax tips for individuals on how to sort through the clutter!

Your Tax Returns
Generally, keep returns and supporting documents for three years after the date the return is filed. That’s the window the IRS uses to look for mistakes. You also have three years from the original filing date to file a return and claim a refund or tax credits. The IRS can add three more years if they identify a substantial error. If you’re self-employed or have a complex return, play it safe and keep the returns and documents for six years.

Its suggested you keep records for seven years if you file a claim for a loss from worthless securities or bad debt deductions.

Personal Residence Improvement Receipts
Keep all improvement-related records for as long as you own your home, plus at least six years after you file your tax return for the year of the sale. This is important for reducing any taxes you may owe on the sale.

Financial Records
Keep bank and investment statements for a year unless they’re tax related. If your bank or broker has the statements online, save them to a password protected folder on your computer. Keep records of any stock or bond purchases for six years after you file your return reporting its sale. You can shred your old cancelled checks since the bank has copies.

Of course, it helps to have a second pair of eyes as you navigate what to toss and what to keep. If you have any questions about tax documents or need other tax tips for individuals, feel free to contact us at Elevate Accounting Solutions today! We provide several different accounting solutions in St. Petersburg for individuals. With our guidance, you’ll always know what documents to toss discreetly and which to save and how.