The Knowledge Nook

Knowing How Long To Keep Records Can Make Tax Day Easier

Posted by Tami Russell on Apr 18, 2017 3:45:30 PM

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Tax season (for most of us) comes to a close tonight as many of us rush to the post office to mail our Federal tax returns.

Wait?  Don’t we always file taxes by an April 15 deadline?  Forbes.com explains, “Tax Day is April 15 unless that date falls on a Saturday or a Sunday, in which case the due date for federal income tax returns gets pushed ahead to the next business day…In 2017, Tax Day falls on a Saturday…Emancipation Day falls on Monday, April 17.  Since that’s a legal holiday in the District of Columbia, the tax filing deadline will be pushed ahead for all individual taxpayers to Tuesday, April 18, 2017.”

Did the three extra days help you with the last-minute rush?  Millions of Americans are still harried today as they prepare to meet the deadline for getting the tax packet postmarked before deadline.

Better Organization May Make For A Better Day

Every year, about this time, lots of us begin asking ourselves if all the reams of paperwork and bloated files we keep are really necessary.   We’ve done some research to find out if we can clear out our offices now that taxes have been filed.    We’ve compiled a handy checklist to help you determine what you must continue to file away  (for years), and what you can toss now!

H&R Block, in a discussion with Anna Sandall of the Tax Institute, reports that “in most cases, you should plan on keeping tax returns along with any supporting documents for a period of at least three years following the date you filed or the due date of your tax return, whichever is later.”

TurboTax concurs, saying, “the IRS recommends taxpayers keep their returns and any supporting documentation for three years after the date of filing; after that, the statute of limitations for an IRS audit expires.”

The H&R Block article goes on to say, “You should keep tax returns and support forms.  This includes W-2s, expense tracking, mileage logs,” and any other documents you noted on the return.

There are exceptions to the three year rule.  Ask your tax accountant, or a trusted source like TurboTax or H&R Block, if in doubt.  H&R Block also reminds us that “certain creditors and even some insurance companies may require you to keep records longer than the IRS.”

Be Safe and SHRED Important Papers!

If you’ve made the decision to discard old tax returns and support documents, remember to SHRED critical papers prior to disposing of them!  This is to protect sensitive things such as your social security number and the corresponding private data of your family.  Find a reputable shredding center, such as one offered by a banks, a credit union, or an office supply store.  Never toss a completed tax return in the trash, or you will be setting yourself or a family member up for identity theft.

Pay Stubs, Bills and Statements:  What Goes, What Stays?

Many of us never see a pay stub, and some may not even remember the days when employees received an actual check from our employers, prior to the days of direct deposit.  However, it’s still important to have access to your pay information.

Financial guru Suze Orman advises that we keep pay stubs for one year.  Once you’ve compared your W2 and annual social security statement to the stubs, these can be disposed of.  (Again, head to the shredder as these may contain sensitive information!)

Here’s a quick review of some other things that we tend to store for far too long.

Utility bills.  It’s safe to depose of these after one year.  HOWEVER, if you are claiming home office deductions on your taxes, refer to the three year tax rule.  Other items it is safe to toss after three years include cancelled checks, credit card receipts, and bank statements.  Experts advise that you hold on to quarterly investment-savings statements until the end of each year, when you should receive a year-end statement that you can file. 

What Are Some Things We Should Never Dispose Of?

Both Suze Orman and the site Lifehacker.com have some ideas of important documents that we should never dispose of, including:

  • Marriage license
  • Birth certificate
  • Wills
  • Adoption papers
  • Death certificates
  • Records of paid mortgages
  • Pension plan documents
  • ID cards and passports
  • Business licenses
  • Military discharge papers
  • Insurance policies
  • Vehicle titles (for as long as you have the vehicle)

As Tax Day 2017 draws to a close, here’s hoping we can all be a bit more organized as we look to 2018!

Topics: lifelong learning

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