Tax Season! But Wait, What Records Should I Keep?
Every year, tax season seems to creep up and end just as quickly. With the stress (or excitement) associated with filing a tax return, it’s easy to get caught up and throw your tax documents away, forgetting to store them for future reference.
Before you relax after completing your tax return, make sure that you know what records you need to keep and how long you need to keep them. You should also have a system in place to organize them for easy retrieval. You never know when you might need your most recent tax documents.
Why Keep Tax Records?
Tax records are not only useful and relevant during tax season. Several occasions may arise where you will need to reference old tax documents, and it is easier if you already have these supporting documents on hand.
Reasons to retrieve old tax documents include:
- Tax Audits: The IRS may audit any individual at any time, so it is important to be prepared with the proper documentation.
- Tracing Income History: There may be times where you need to trace your income history for personal reasons, and having all of the proper tax documentation makes that a much easier task.
- Applying for Loans: When applying for loans, you may be required to prove that you have had stable income for the past few years, meaning they may request previous years’ tax information, such as W-2 forms.
- Legal Reason: You may need to document transactions or income for many different types of legal proceedings, for example; to determine child support payments.
- Insurance Reasons: Some creditors and insurance companies may require you to keep your income tax return and supporting documents for even longer than the IRS does.
What Records Should I Keep?
You should keep any relevant documents and financial records that you used to file your taxes, including:
- W-2 forms
- 1099 forms
- Receipts
- Mileage logs
- Any additional paperwork that supports your tax deductions and credits
How Long Do I Need to Keep Tax Records?
According to the IRS, you should keep tax records for three years from the date you filed your return or the date the tax return was due, whichever is later. Three years may benefit you because this gives you this time to claim tax refunds that you previously had not claimed. However, three years also give the IRS enough documentation to go back and substantiate anything you may have claimed on your taxes, as well as claim additional tax.
How to Request Copies of Tax Records
If you find that you may have misplaced or accidentally thrown away some of your income tax records, you may still be able to retrieve copies of them.
Depending on the records you need, you may have a couple of different options when it comes to retrieving a copy of those records. You must figure out what you need to request and then what year(s) you need. For example, if you need credit cards or bank statements, you can retrieve these documents from your financial institution.
If you use an accountant or attorney to handle your taxes, they can provide you with a copy of the records that you need.
The IRS is the best source for your tax returns and other tax documents. The IRS keeps records of several types of information statements from third parties, including your employer, financial institutions, and others who may have paid you. The documents from the previous year become available to you after the April filing deadline.
The IRS charges a fee for the prior year’s tax returns, but they provide tax transcripts, which summarize return information and include Adjusted Gross Income, for free. These transcripts often have the relevant information that you need. They remain available for three years.
If you would like to request copies of your tax forms or transcripts from the IRS, you contact them several different ways:
- By Mail
- By Phone
- Through IRS Get Transcript
Tips for Keeping Tax Records
- If you choose to keep all of your tax records beyond the three-year minimum, you may benefit from using technology to store your records and make them easier for you to retrieve when needed. Make sure that you use good security software. If you like keeping paper versions of documents, consider keeping them in a fire-proof safe.
- If you opt to dispose of your old records, make sure that you destroy them. Tax returns contain sensitive information that is very attractive to thieves. It is a good idea to shred any paper records before disposing of them.
- For retirement accounts, you should plan to keep your tax records for seven years after the funds have been completely withdrawn. There may be other situations where the three-year statute of limitation does not apply, so be sure to fully assess your circumstances when determining how long you should keep your tax records.
- If you file a fake return or don’t file one at all, the statute of limitation never expires and the IRS can always come after you.
- Keep property records until the period of limitations expires for the year when you sold the property.
- Your state may have a different statute of limitations when it comes to saving tax documents–longer than three years. Therefore, it is a good idea to review your state laws as well.
Saving Your Tax Records
Even though tax season is over, the documents used to file your taxes may still have a purpose. There are many reasons that you may have to refer back to your past tax documents, whether it be to prove your income or assess your income history. Having a proper system to store your documents for at least three years will make it easy to retrieve your documents when you need them, giving you peace of mind.
It can be difficult to keep track of all of your tax forms, but FormPros help you easily generate forms digitally, making them easy to store and retrieve for later use. Use FormPros to create your W-2 forms, 1099 forms, and more!