As tax season begins to wind down, it can be tempting to clean up by shredding old records. But before you shred any of your tax documents, it’s important to assess what you have to make sure you’re not getting rid of anything too soon.
What to Keep and For How Long
In general, tax records should be kept for at least 3 years. During this 3-year period, the IRS can assess additional taxes and you can amend your tax returns if necessary.
There is one exception to the 3-year rule: the IRS has 6 years to perform an audit if you omit more than 25% of your gross income on your tax returns. Further, if you file fraudulent returns or don’t file at all, the IRS has an indefinite amount of time to initiate action against you.
Holding on to old tax records may also be useful for other reasons because creditors and insurance companies often use tax documents as proof of your income or the value of your assets.
|Retention Time||Record Type|
|*While most states follow the IRS period of 3 years, some states give themselves extra time. Arizona, California, Colorado, Kentucky, Michigan, Ohio, and Wisconsin, for example, all have 4 years to perform an audit.|
Even after the period of limitations has passed, it may still be a good idea to keep copies of your tax returns on hand. The IRS may still need copies of your old returns if it cannot find them due to technical glitches or filing errors.
Why It’s Important to Stay on Top of Shredding Tax Records
After the period of limitations has passed, it’s important to shred your old tax records to protect your identity.
Tax records and other financial documents are a kind of personal identifiable information (PII) that can be used to fraudulently process transactions or gain access to your accounts.
By securely shredding these records, you can prevent would-be identity thieves from gaining unauthorized access to your information.
If you’ve digitized your records, mobile shredding services can even take care of any sensitive data you may have stored electronically by shredding your hard drives.
Ready to Shred Your Old Tax Records?
For a free, no-obligation quote from a shredding provider in your area, fill out our form on the right or give us a call at (800) 747-3365.