You know you’re supposed to keep your tax records after you submit them, but when is it time to finally shred them? If you’re like most people, you may think that all tax records and receipts need to be kept forever. However, not only is this not the case, but it can also create a paperwork nightmare. Fortunately, these guidelines from the IRS will give you a good idea of when it’s safe to free up some room in your filing cabinet.
Records You Should Keep Indefinitely
- Paperwork from when you file a fraudulent return. A better option would be to never file a fraudulent return.
- Paperwork from years you don’t file a return. Unless you have zero income, it is advisable to file a return every year. Even if you don’t make enough money to pay taxes, you are most likely entitled to a refund or credit from the government.
Records You Should Keep for 7 Years
- Paperwork from when you file a claim for loss on securities/bad debt deduction.
Records You Should Keep for 6 Years
- Paperwork from when you failed to report income you should have, and that income is equal to more than 25% of the gross income you provided on your tax forms. You should report all income every year, but if you find yourself in this situation make sure to hold onto your records for six years. You may be required to pay taxes on the income you did not report along with retroactive late fees.
Records You Should Keep for 4 Years
- Paperwork related to your employees. Any employment tax records should be held onto for four years. This includes your employer identification number, the amounts and dates of all payments for wages, annuities, and pensions, and other tax-related paperwork related to your employees.
Records You Should Keep for 3 Years
- Paperwork from when you file a return and owe taxes. If none of the above situations apply, and you still owe, keep your paperwork for three years.
- Paperwork from filing for a refund or credit after you have submitted your taxes. This paperwork should be kept for 3 years after you’ve filed your original return, or two years after you paid the tax. Hold onto them until the latter of the two dates has passed.
Records Related to Assets
When you sell a property, keep all related paperwork until the period of limitations expires. For tax purposes in Florida,this period is anywhere from 3-20 years. Having this paperwork allows you to figure out and defend your calculations on things like amortization, depreciation, and gain or loss from selling the asset.
Hopefully you are not in a situation where you need to keep any tax forms indefinitely, which is good news for the space in your filing cabinet. In most situations you will only need to hang onto them for 3 to 7 years, with the occasional 20 year period of limitations for disposal of assets.
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