With tax season now behind us it’s a good time to take a look at all the paperwork you may have accumulated and aren’t really sure what to do with. How long should you keep all those documents?
For tax purposes the IRS indicates the length of time you should keep a document depends on the action, expense, or event which the document records. Generally, you must keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out.
The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax. There are many scenarios that the IRS lists but if you keep your records for at least seven years you should be good.
Generally, the IRS can include returns filed within the last three years in an audit. Additional years can be added if a substantial error is identified. Generally, if a substantial error is identified, the IRS will not go back more than the last six years, so the seven year rule will cover you here.
The nice thing about technology is that you can scan these documents and keep them on your computer where they take up much less physical space but are still easily accessible.
If you’re still old school and keeping the physical papers, hold onto them for at least seven years and then send them through the shredder.