Spring Cleaning Your Tax Records: What to Keep and What to Trash

With tax season behind us and spring cleaning in the forefront,  you may be looking at your financial records and asking yourself, “What do I need to keep?” For many taxpayers, the instinctive answer is, “Everything.” While the IRS does encourage you to keep important tax records, you don’t need to store every record indefinitely. There are documents you can safely dispose of without fear of governmental reprimand.


Statute of Limitations

The IRS recommends that you keep tax refunds and supporting documentation until the statute of limitations – the period of time in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax – runs out. This time period depends on the action, expense, or event which the document details.


Generally, if you file a correct and timely tax return, the statute of limitation is three years after the date of filing or due date of the return, whichever is later. If you report your income incorrectly, commit a tax crime, or receive income from foreign assets exceeding $5,000, the statute of limitations could be extended to six years. There is no statute of limitations if you file a fraudulent return or refuse to file. [editorial note: source]


What to Keep

While the list provided is not exhaustive, consider keeping any records that demonstrate:

  • Income, deductions, and credits reported on your tax return
  • Eligible expenses for withdrawals from health savings accounts or 529 college-savings plans
  • Business expenses
  • Tax-deductible retirement-savings contributions
  • Health insurance information
  • Property ownership [editorial note: source]


To save space, consider scanning these documents and storing them electronically. Organize them so that you are able to produce them in hard copy form if needed.


What to Toss

There is no golden rule for throwing tax documents away, so do whatever you are most comfortable with. Consider disposing of the following documents after confirming that they are no longer needed for tax purposes:

  • Duplicates of receipts
  • Records that don’t supplement or attest to the deductions or credits taken in your tax return
    • Example: You don’t need to keep charitable gift receipts if you don’t claim the charitable gift deduction.
  • Tax returns that have exceed their period of limitations
  • Paycheck stubs (once you have confirmed they match your prior end of year statements, like your W-2 and annual Social Security statement) [editorial note: source]


Once you have confirmed that your records do not serve any tax purposes, ask yourself if they serve any non-tax purposes. For example, insurance companies and creditors may require you to preserve certain documents longer than the IRS does.


Disposing of Records

Act cautiously once you have decided what you can safely get rid of. When disposing of unnecessary records, be sure to shred them. Don’t toss them into a recycling bin or trash can. Your records contain private information that you wouldn’t want ending up in the wrong hands.    
Organizing your tax records into “Keep” and “Shred” piles can be difficult and requires a solid understanding of IRS tax and audit proceedings. For help sorting through your documentation, contact our tax professionals today.