The short answer is: wait. You need to hold on to all of your tax records for now. But this is a great time to take a look at your records for previous tax years and determine what you can purge.
The 3-year rule
At minimum, keep tax records for as long as the IRS has the ability to audit your return or assess additional taxes, which generally is three years after you file your return. This means you likely can shred and toss most records related to tax returns for 3 years and earlier years.
What to keep longer
You’ll need to hang on to certain tax records beyond the statute of limitations:
- Keep tax returns themselves forever, so you can prove to the IRS that you actually filed. (There’s no statute of limitations for an audit if you didn’t file a return.)
- For W-2 forms, consider holding them until you begin receiving Social Security benefits. Why? In case a question arises regarding your work record or earnings for a particular year.
- For records related to real estate or investments, keep documents as long as you own the asset, plus three years after you sell it and report the sale on your tax return. Not all losses can be taken in the current year. Some must be taken little by little over several years. Each year a portion of the loss is taken, extends the time before you should begin counting the 3 year period for keeping those tax records.
Just a starting point
This is only a sampling of retention guidelines for tax-related documents. This area of the tax law can become highly technical, very fast. If you have questions about other documents, please contact us. We have training and advisory services to help guide you through this.
© 2020 Ben R Shull CPA LLC