March 16, 2022 · Budget, Investment, Savings, Taxes
The 2021 U.S. federal tax filing deadline is coming up, and some filers are pulling together everything they need for an efficient, thorough, deduction-maximizing and on-time filing. But after that Monday, April 18 filing deadline for 2021 taxes is met, it doesn’t mean that the paperwork is over. When taxes are done, document retention is just beginning. It’s important that the documents used to file personal taxes are not destroyed or discarded; they need to be kept for a while—and a “while” to the U.S. government income tax authority means several years.
The U.S. Internal Revenue Service (IRS) advises that tax filers should hold on to any records that will validate any itemized tax deductions or tax credits that are claimed on a 2021 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. Details on how long to hold on to filing documents vary, as the IRS is particular about the time limitations for managing different types of records.
According to the IRS, it “…generally recommends keeping copies of tax returns and supporting documents at least three years. Employment tax records should be kept at least four years after the date that the tax becomes due or paid, whichever is later. Tax records should be kept at least seven years if a return claims a loss from worthless securities or a bad debt deduction. Copies of previously-filed tax returns are helpful in preparing current-year tax returns and making computations if a return needs to be amended.”
The more detailed IRS’ time periods of limitations that apply to income tax returns and different filing situations are:
Following are just some (but not necessarily all) key types of documents you may want to retain and hold securely after filing taxes:
When in doubt about holding on to some records, well, hold on to them. However, keeping tax documents doesn’t mean you always must maintain 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 has requirements for—digital documents. Also be careful about protecting your digital documents.
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