It’s often difficult to know when you can rid yourself of personal records like tax paperwork. Also, it may be hard to know what parts of one’s tax paperwork one needs to save. For example, does one need to save receipts for itemized deductions, or statements of income earned after tax paperwork has been filed?
It makes sense to understand how and when the IRS or individual states can investigate one’s tax returns. The following standards apply. The IRS can challenge your tax returns for up to three years after they have been filed. They have six years to analyze your tax paperwork and audit you if they find you have unreported income. Therefore, it makes sense to keep tax paperwork for at least seven years.
Afterwards, one may still want to hold onto actual returns, but accompanying materials, like receipts, W-2s, 1099 miscellaneous forms, and statements about interest earnings can usually be discarded. This tax paperwork should not only be discarded but should be shredded to avoid possible identity theft. Many of these documents list important information like your social security number, making it quite simple for a thief to steal your identity.
There are a few reasons why it might make sense to hold onto some tax paperwork for longer than ten years. For example, W-2s list monies paid to social security. If you have always contributed a maximum amount to social security payments, and later upon retirement the government offers you less than that to which you are actually entitled, you can use old W-2s to prove your eligibility for more money. Mistakes can happen, even in government, so having a way to prove your eligibility to receive retirement income from the state can be of value.
What you can definitely do is get rid of things like quarterly statements and pay stubs once you have received W-2s, 1099 miscellaneous forms, or year-end statements. There is no need to keep this additional tax paperwork around since it duplicates information you already have in your possession. Also, if you need to look at an old tax return, and do not have one, you can order one from the IRS. Remember to keep this filed for at least seven years, after its original filing date.