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Documents You Should Keep for Tax Reasons  Thumbnail

Documents You Should Keep for Tax Reasons

Melissa A. Seamon, CFP®

Financial Advisor 

Tax season is right around the corner and now is the time to get organized. For tax reasons, let's review what documents should be kept and for how long. Plus, we'll share some organizational tips that can make tax season just slightly less of a hassle.

When it comes to taxes and record-keeping, personal circumstances will vary. What follows is a general list of documents you should keep for tax purposes. Note that this is not an exhaustive list. Your situation may result in other documents not outlined here. If you aren't sure if something should be kept, err on the side of caution and stash it safely just in case! 

1. IRS Form W-2

If you are employed, you should expect to receive a W-2 each year of your employment. Retain your W-2 as well as any W-9 forms that you complete when beginning a new job or establishing a new relationship that may result in income.

2. IRS Form 1099 (any version)

If you are self-employed or have some other form of income not based on traditional employment, you may receive IRS Form 1099-NEC, 1099-MISC, or 1099-K. Hold on to any 1099's you receive. These can be for self-employment income, interest income, dividend income, or any other form of non-employment income. 

3. Business Receipts

Retain your receipts from business-related expenses. You might have receipts for charitable donations, medical expenses, and work-related travel.

4. Old Tax Returns

It may go without saying but be sure to retain your old tax returns. The IRS suggests maintaining these for no less than three years. If you feel uncomfortable with discarding them even after that timeframe, consider keeping the primary forms like the first two pages and your Schedule C if you filed one.

5. IRS Form 1098 and Other Real Estate Documents

If you received a 1098 form outlining your mortgage interest, retain that for your records. Also, save any documents related to real estate transactions, such as notifications of your mortgage being bought or sold, in case there is any double reporting of mortgage interest.

6. Bank and Credit Card Statements

If you want to maintain records of spending, keep your bank statements and credit card statements. Banks usually keep these on record for about seven years. However, if you terminate your relationship with them, you may lose access to the documents online. Therefore, having a copy of your own would be prudent.  

How Long Do I Need to Keep Tax Documents?

The Internal Revenue Service states that you should retain tax documents for at least three years. The length of time depends on the type of document it is and if there is any chance of an audit. There are very few reasons one would need to keep any documents beyond seven years.  

Interestingly enough, the IRS also states that you should keep your documents indefinitely if you file a fraudulent return. It seems this would be counterintuitive to those filers' goals, but hey, you can't blame the IRS for trying!  

Digital Document Storage Options

Are you tired of all the paper?  

Simplify your record-keeping by using digital document storage options such as Google Drive and iCloud. These options allow you to store and access all of your files in one place. In addition, you can access cloud-based storage options from any computer or smartphone, so you can even consider discarding the originals. Do you feel intimidated by the idea of digital storage? Have no fear!  Just enlist the help of a child or grandchild, it’s very likely they will know how to help you.  

When it comes to record-keeping, less is not more. Embrace digital storage solutions and save copies of everything! You never know when it might come in handy later down the road.

Securely Getting Rid of Documents

If you choose not to embrace the digital storage solution, you’re bound for a deluge of unnecessary papers.  It might be tempting to throw out old paperwork, but this can leave your identity and financial life at risk.  

Shredding your bills and receipts is excellent for protecting your identity.  If you have a big pile though, manual shredding will be a gigantic pain.  

You can bring your documents to facilities like the UPS Store or Staples to discard records for a fee, or you can check with your bank, CPA, or financial advisor who may use a shredding service and shred your items for no charge.

Most of us tend to have more stuff than we need, so getting some old tax papers out of the way can be physically and mentally beneficial.  

For more information about the comprehensive planning services we provide, we encourage you to take a look around our website and see if we could be a good match. We best serve clients looking for exceptional client service and that value a long-term partnership and have minimum of $500,000 in investable assets.

If this sounds like you, we encourage you to reach out to us and schedule a  Complimentary Consultation. Just call us at 1-800-550-3880. Our professional  staff has over 175 years of combined experience and would be happy to see if we can  be of service to you, as well.

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