Record Retention Guide
How to store tax records and their supporting documents properly
How Long is Long Enough?
Federal law requires you to keep and maintain copies of your tax returns and your other supporting documents for up to three years. This "three-year law" can lead many people to believe they're safe as long as they retain their documents for this period of time.
However, if the IRS believes you have underreported your income, they may go back six years in an audit. The IRS can also do this if they believe there may be an indication of fraud.
Just to be safe, check on these guidelines:
Business Records to Keep...
Personal Records to Keep...
Create a Backup
Create a Backup Set of Records and Store Them Electronically.
Keeping a backup set of records is easier now more than ever. Many financial institutions provide electronic statements and documents. your bank statements, tax returns, insurance policies, etc.
Even if the original records are provided only on paper, you can be scan and convert them to a digital format. When the documents are in electronic form, taxpayers can simply download them to a backup storage device. We recommend using an external hard drive, or burning them onto a CD or DVD. Don't forget to label it!
You could also consider online backup. This is the only way, currently, to ensure that data is completely safe and protected. Online backup services store files in another region of the country, so that if a hurricane or other natural disaster occurs, documents remain safe.
Caution: Identity theft is a serious threat in today's world. It is crucial to take every precaution available avoid it. After it is no longer necessary to retain your tax records, financial statements, or any other documents with your personal information, you should dispose of these records by shredding them and not disposing of them by merely throwing them away in the trash.
There are special circumstances when it comes to certain records. Please go over the following list to make sure you have what you need.
- Car Records (keep until the car is sold)
- Credit Card Receipts (keep with your credit card statement)
- Insurance Policies (keep for the life of the policy)
- Mortgages / Deeds / Leases (keep 6 years beyond the agreement)
- Pay Stubs (keep until reconciled with your W-2)
- Property Records / improvement receipts (keep until property sold)
- Sales Receipts (keep for life of the warranty)
- Stock and Bond Records (keep for 6 years beyond selling)
- Warranties and Instructions (keep for the life of the product)
- Other Bills (keep until payment is verified on the next bill)
- Depreciation Schedules and Other Capital Asset Records (keep for 3 years after the tax life of the asset)