Strive Tax & Accounting, LLC|Document Retention|Green Bay

Document Retention Guide

for Individuals

Storing individual tax records:

How long is long enough?

Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the "three-year law" and leads many people to believe they're safe provided they retain their documents for this period of time.

However, if the IRS believes you have significantly under-reported your income (by 25 percent or more), it may go back six years in an audit.  In addition, the statute of limitations in some states exceeds the federal statute, or the states have laws or regulations that require taxpayers to maintain records beyond the state’s statute of limitations, often to verify carryovers, etc. Tailor your years of retention to the longer of the federal or state requirements.​

In deciding your own record retention schedule, consider indefinitely keeping those records that cannot be recreated by any other office, institution or governmental unit. Also, keep in mind your own financial concerns that may affect the length of time you keep your records. Most importantly, consult with your attorney for approval of any record retention policy.

Keep For One Year

While it's important to keep year-end mutual fund and IRA contribution statements forever, you don't have to save monthly and quarterly statements once the year-end statement has arrived.

 

Keep For Three Years

  • Credit Card Statements

  • Medical Bills (in case of insurance disputes)

  • Utility Records

  • Expired Insurance Policies

Keep For Six Years

  • Supporting Documents For Tax Returns

  • Accident Reports and Claims

  • Medical Bills (if tax-related)

  • Sales Receipts

  • Wage Garnishments

  • Other Tax-Related Bills

Personal Records To Keep Forever

  • CPA Audit Reports

  • Legal Records

  • Important Correspondence

  • Income Tax Returns

  • Income Tax Payment Checks

  • Property Records / Improvement Receipts (or six years after property sold)

  • Investment Trade Confirmations

  • Retirement and Pension Records (Forms 5448, 1099-R and 8606 until all distributions are made from your IRA or other qualified plan)

 

Special Circumstances

  • Car Records (keep until the car is sold)

  • Credit Card Receipts (keep until verified on your 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)

  • 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)

What is the best way to store your documents?

The best way to store hard copies of tax documents is in a fire-proof safe. Along with your tax records you can keep other important documents like the deed to your house, mortgage and insurance information, your Will or Trust documents, and passwords to bank and brokerage accounts. It’s also a good idea to tell one other person where you keep the key to the safe (e.g., a spouse or other trusted family member). This way, if an emergency arises, that individual will know how to access any documents they may need to keep your affairs in order.

Finally, if you plan on keeping your records for a long time but also don’t want your home to look like an episode of “Hoarders”, consider scanning your documents and keeping a backup of the files on a cloud service. The IRS accepts digital copies of documents as long as they are legible. This method takes up far less space and is easier to organize than a stack of papers.

When it's time to get rid of your tax documents

​Before getting too excited and throwing your old returns away, check to make sure you do not need to keep it for other purposes. For instance, certain creditors and even some insurance companies may require you to keep records longer than the IRS does. If you do decide to get rid of tax documents, make sure to shred them. Tax returns contain sensitive information that identity thieves love.

see also
 Our primary goal as a trusted advisor is to be available and to provide insightful advice to enable our clients to make informed financial decisions.

Continually striving for accuracy, excellence and the highest level of integrity.

Strive Tax & Accounting, LLC

CPA's specializing in small business tax and accounting with emphasis in construction and manufacturing for corporation and passthrough entities.

PO Box 28353

Green Bay, WI 54324

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