Is it time to pay your taxes? Find which tax documents you should keep.

Is it time to pay your taxes? Find which tax documents you should keep

The tax deadline has come and gone, but before you throw all of your tax documents up in the air to celebrate the occasion, we need to discuss just how long you should keep that info in a safe and secure place.

That’s right, you should store your tax information and documentation — including a copy of your tax return — for safekeeping, just in case you need to reference it. But for how long?

Three-Year Time Limit

When we talk about tax documents, we’re referring to a copy of your tax return, as well as W2s, mileage logs, 1099s, receipts, and any other material that will help you prove your tax deductions or credits. This includes whatever you used to prove your financial situation on your tax return.

According to the IRS’s statute of limitations, you should maintain your tax records for at least 3 years following the date on which you filed. If you filed this year by the May 17th, 2021 tax deadline, you should maintain your 2020 tax return documentation until April 2024.

This time limit was established for the benefit of both you and the IRS. Because you have a certain length of time to claim any tax refund that is owing to you, you can benefit from this 3-year timeframe. On the other hand, if the IRS requires proof of what you claim on your taxes, they will usually go back three years.

You have until April 15th, 2022 to claim a tax refund if you didn’t claim a tax deduction or credit on your 2018 taxes, or if you didn’t file your 2018 taxes at all.

Extenuating Circumstances

A “but” is always present. When dealing with retirement accounts, retain your tax records for at least seven years after the funds have been totally withdrawn. If you claim a bad debt deduction or a loss on stocks that you categorized as worthless, you need keep your documentation for at least that long.

Property records (including stocks and equipment) should be preserved until the 3-year statute of limitations on the tax year in which the property was sold and claimed on your tax return expires. If you failed to report more than 25% of your income on your tax return,

If you fail to report more than 25% of your income on your tax return, the IRS has six years to levy any additional taxes that are due. Keep those documents for at least six years if this situation suits your finances.

Plan on retaining your financial records for the rest of your life if you submitted a fake tax return or refused/forgot to file a tax return. The IRS does not have a statute of limitations in this matter.