April 24, 2024 · Investment, Retirement, Savings, Taxes

Why You Should Consider Retaining Some Tax Documents After Your Taxes Are Filed

All your taxes are completed and filed and everything seems in order. Why would you want to keep this or previous years’ tax forms and any related documents? Those papers and file folders are just taking up needed storage space. But the government recommends holding onto some documents for a while.

Currently, the federal government usually recommends that taxpayers keep copies of common tax documents for at least three years

The IRS generally advises that tax filers should maintain any records that will validate any itemized tax deductions or tax credits that are claimed on their most recent tax return. If the documents—either in paper or digital form—will be used to establish any tax claims for last year, then keep them for several years after filing taxes this year. Government details on exactly how long to keep copies of filing documents vary, as the IRS is particular about the time limitations for managing different types of records.

According to the IRS, it “Well-organized records make it easier to prepare a tax return and help provide answers if your return is selected for examination or if you receive an IRS notice.

You must keep records, such as receipts, canceled checks, and other documents that support an item of income, a deduction, or a credit appearing on a return as long as they may become material in the administration of any provision of the Internal Revenue Code, which generally will be until the period of limitations expires for that return.”

The more detailed IRS’ time periods of limitations that apply to income tax returns and different filing situations often recommends retention limits of three to seven years, but depending on certain situations the records may need to be kept indefinitely, especially “if you do not file a return or if you file a fraudulent return.”

To understand requirements associated with your specific situation, contact your tax advisor or the IRS.

Why types of tax-related documents should you consider keeping for possible future needs?

The IRS recommends keeping several types of documents, especially those that may be business related. Following are just some (but not necessarily all) key types of documents you may want to think about retaining and holding onto securely after filing taxes:

  • Tax returns for previous years
  • Forms W-2, Wage and Tax Statement
  • Form 1099-MISC, Miscellaneous Income
  • Form 1099-INT, Interest Income
  • Form 1099-NEC, Nonemployee Compensation
  • Form 1099-G, Certain Government Payments, which include unemployment income or a state tax refund
  • Form 1095-A, Health Insurance Marketplace Statements
  • Documents related to home ownership, such as for mortgage payments and mortgage interest
  • Financial statements from savings, checking and investment accounts, including those that record purchases and sales of investments
  • Financial statements from retirement accounts
  • Financial statements from estate, trust and foundation accounts
  • Canceled, scanned, returned or substitute checks
  • Credit card and other receipts, including for meals that may be deductible
  • Bills, including those for major medical care, college tuition, child care and energy-saving home improvements
  • Invoices for services, such as tax preparation, or for other services or good that may be tax deductible
  • Mileage logs, hotel receipts and plane tickets
  • Other forms of proofs of payment, either to someone or from someone, such as for a real estate or other property transaction. These could include records of cashiers’ checks, wire transfers, or of other electronic methods for transferring money.

Delta Community annually provides certain tax documents to its members for their use and records, including some in the above list.

Should you really hold on to old tax records?

When in doubt about holding on to some records, it is probably a better idea to keep them. However, keeping tax documents doesn’t necessarily mean you are limited to only keeping paper copies of them. Paper documents can be scanned (by printers, copiers, cellphones and cameras) and stored electronically to cut down on physical storage space. The IRS does allow—but, as you might expect, has specific requirements for—digital documents, and more information on that is available from the IRS. Also, be careful about protecting your digital documents; they should be backed up with a second copy, encrypted, and the back-up should be in a secure location.

Could we interest you in other, somewhat less taxing information?

For more helpful financial information, check out the free Delta Community Financial Education Center webinars on a range of money- and tax-related topics. You can visit the Financial Education Center's Events & Seminars page to register for its no-cost, on-demand webinars. The Credit Union's blog has more information that could be educational and helpful: