I always want to throw anything away that I can (get away with). And with tax season here – and thankfully almost gone – it’s the time of year that Tyler and I do some spring cleaning to all of our papers and files.
Before you panic, I know that it’s actually important to keep certain papers. Here’s a helpful article that I hope helps you too know what to keep (and how long to keep it).
Believe me, I have a countdown – counting the days until I can throw it away!
PS I think this article either came from Real Simple or Martha Stewart Living… I do want to give credit to whom credit is due, but I just cannot remember… (I bet I threw away the rest of the information;)
Step #2: Hang onto what you must.
You will, however, need to hold onto those final credit-card statements, along with your W-2s and 1099s, for at least three years and, preferably, for seven. The Internal Revenue Service has up to three years from the date you file your tax return to examine it for errors and as long as six years to conduct an audit if there’s reason to suspect you underreported your gross income by 25 percent or more. (There is no statute of limitations for anyone who has deliberately committed fraud.) Indeed, you’ll need to keep any paperwork that supports your return until that audit window closes.
Among the additional documents you should retain: canceled checks and receipts for all deductible business expenses (such as those for entertainment, home-office equipment, and professional dues), retirement-account contributions, charitable donations, child-care bills, out-of-pocket medical expenses, alimony, and mortgage-interest and property-tax payments.
Unless you’ve knowingly submitted a false return, you can toss these supporting documents after three to seven years, depending on how straightforward your tax situation is.
But don’t throw out the actual tax returns or the year-end summaries of your investment accounts, even after the chances of an audit have all but vanished. These documents don’t take up much space and can come in very handy for future financial planning.
For insurance purposes, you’ll also want to keep receipts for major purchases and receipts that show how much you’ve paid for home improvements indefinitely, both to satisfy potential buyers and to reduce possible capital-gains taxes when you sell your home. True, these records are not as important as they once were because of recent changes in the law that exempt from taxation the first $500,000 in profits from the sale of a home ($250,000 for singles), but they may still come in handy. It is crucially important to keep the confirmation slips that show beneficiary designations and the purchase price of stocks, mutual funds, and any other investments you hold; hang onto these records indefinitely because some day, says Slott, “you or your heirs will have to know exactly how much you paid to determine the profit on your investment for tax purposes.”