You don’t need to keep all your tax records forever. There is a statute of limitations imposed on the IRS’s ability to audit you. Once this statute of limitations has passed, the IRS is legally prohibited from even asking you questions about those year’s returns. In other words, you don’t have to keep your tax records forever.
But, once the statute of limitations has expired, and the IRS can’t go after you for additional taxes, you can’t go after the IRS for additional refunds either.
So what should you keep, hold for some time, or throw out?
Keep Indefinitely
Some of the following things may seem obvious to you, but it is still important to list them.
- Birth Certificates
- Death certificates
- Adoption papers
- Life insurance policies
- Records of paid mortgages
- Marriage certificates
- Divorce papers
- Custody agreements
- Wills and other estate planning documents
- Deeds to property
- List of your financial assets – which you should always keep current.
- Military records or record of any governmental employment
- List of previous employers
- Passports
- Photographic or video record of house and household contents – this is usually required by your insurance, but if not, it is a very good idea to have photographs saved on a cloud so you can prove your valuables in case of loss.
- Tax forms and records relating to nondeductible IRA contributions
Keep for a Period of Time
You need to keep different documents for differing amounts of minimum times. Your specific situation may require you to keep certain items longer. Use this only as a general guideline. A CPA can tell you exactly what you need to keep and what you can get rid of and when.
Also, remember that the IRS has the ability to audit you for:
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- 3 years after you file a tax return
- 6 years if you are self-employed or underreported your income by at least 25%
- Forever if you didn’t file a return or filed a fraudulent return.
So a lot of the following will be based on a “3 or 6 Year” rule (depending on if you are self-employed).
Things to keep for 3 years if employed, 6 years if self-employed:
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- Income tax returns
- Supporting tax documents (for income or deductions, ie: W2s, 1099s, mileage logs, receipts, everything you need when you filed your taxes)
- Bank Statements
- Canceled checks
- Credit Card Statements
- Utility bill payments
Everything except your tax returns you can get rid of after 1 year IF you did not use them on your tax returns (ie: receipts for purchases that weren’t used as deductions).
Things to keep for at least 3 years:
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- Records of selling a stock
- Medical bills
- Records of selling a house – Keep 3 years after it’s paid off
Things to keep for 6 years:
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- Receipts for home improvements – 6 years after you sell your home (except if it’s a “rollover” transaction)
- Property tax records and disputes – 6 years after you sell your home
Things to keep for 7 years:
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- Loan payoff paperwork or evidence of completion of a payoff agreement. DO NOT THROW THESE OUT FOR AT LEAST 7 YEARS.
- Contracts. All contracts.
Other time frames for paperwork:
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- Keep pay stubs until you receive your W2s, 1099s, social security unemployment, etc statements and you’ve confirmed the forms match with your payment records.
- Keep owners manuals, warranty receipts, vehicle titles, records of repairs and maintenance, etc, until the item is sold, tossed, or the warranty expires.
- Keep savings bonds until you cash them in. Keep the paperwork you receive when cashing them in as you would any other income tax document).
- Purchase slips for stocks and mutual funds should be kept until they are sold.
- Insurance paperwork should be kept until the policy is renewed OR for 4 years after the policy is canceled or expires.
- Business records are a totally different ball game played with a totally different set of rules. You need to talk with a CPA about what business records to keep and for how long.
Things You Don’t Need To Save
- Warranties, manuals, or receipts for items like appliances, electronics, or cars that you don’t own anymore
- Receipts for smaller items that aren’t tax-deductible and don’t have warranties.
- ATM receipts (you only need them until you reconcile your monthly bank statements)
As stated before, this is only a general guideline for how long you need to keep paperwork. Your specific circumstances may require you to hold on to some documents longer. It is also a good idea to have digital copies of everything stored somewhere safe in case of fire or theft.