How Long Should You Keep Your Tax Documents? The Answer Might Surprise You
We’ve all got at least one pile of paperwork clogging up a corner of our house. With tax season over (unless you filed an extension) you might be wondering — when can I get rid of tax documents?
We spoke to tax experts from around the country to get all the details on tax documents. That includes what to keep, what you might need again and when you can send documents to the shredder. Here’s everything you need to know about when to get rid of tax documents and managing your tax paperwork responsibly.
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What Forms Are Considered Tax Documents?
Before diving into the specifics of when to get rid of tax documents, it helps to know exactly what documentation we’re talking about. Depending on your work and income, you probably got a variety of tax documents. Here are a few of the most common forms.
- W-2: Income from your employer: This document shows your wages earned from an employer during a given tax year.
- 1098: Mortgage or student loan interest you paid: If you paid interest on a mortgage or student loan during a given tax year, you may have received this document.
- 1099: Other forms of income (not from an employer): These include forms like the 1099-DIV, 1099-INT, 1099-B, 1099-MISC, 1099-NEC, all of which report various forms of income you earned that were not from an employer. This will include interest on certain investments, like your retirement accounts, and payments from freelance clients.
- 1095-A: Health insurance marketplace statement: This may help you reconcile any payments or claims made with your health insurance provider. If you’re a freelancer, you may also be able to claim your insurance premium as a deduction.
Other Important Documents
While this list is by no means exhaustive, it does go to show how quickly tax documents can accumulate. Depending on the specifics of your finances, the people you support financially, the assets you own, and even whether or not you received unemployment or social security benefits — everyone’s tax documents will look a little different.
For the full list of tax documents (and to find out what you may be missing) review this tax document guide from the IRS.
Another thing to note about tax-related paperwork: You may also need to keep certain bank statements and receipts. Here’s why.
“You should hold on to loan documents, financing agreements, and anything correlated to a big purchase related to assets such as cars, houses, or equipment,” said Christian Maldonado, CEO and founder of accounting firm Finsult. “These documents are important to show the original purchase record, in order to reference value for tax benefits such as depreciation.”
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When Can You Get Rid of Tax Documents?
Now that you know more about the documents, it’s time to dive into how long to keep them. The recommended timeline may surprise you.
“In general, you should hold your old tax documents for about seven years,” said Romeo Razi, a certified public accountant (CPA), founder of TaxedRight.com and former IRS employee. “In most cases, the IRS can only go back three years to audit you, but in some rare cases they can go back six years.”
Razi and other CPAs advise that you don’t get rid of tax documents for at least seven years. But when it comes to big purchases, like those mentioned by Maldonado, the recommendation is significantly longer.
“The most important tax documents that are recommended to be kept longer than the standard seven years are those related to purchasing real estate,” Razi said. “That’s because the IRS may want evidence as to how much you purchased a property for, and in some cases that might be from 10 or 15 years ago.”
Razi said this is important for residents of non-disclosure states. They don’t require the disclosure of real estate sale prices to any public domain. The list of non-disclosure states includes Alaska, Idaho, Kansas, Louisiana, Mississippi, Montana, New Mexico, North Dakota, South Dakota, Texas, Utah and Wyoming.
If you live in any of those places, you’ll want to keep a paper trail of your real estate purchases somewhere safe in case the IRS comes knocking.
And if keeping the actual documents feels like a pain, you can always digitize your records.
“Consider scanning your documents and keeping a backup of the files on an encrypted hard drive or in the cloud,” said Roxanne Hendrix, a CPA and tax expert with JustAnswer. “The IRS accepts digital copies of documents in a legible format.”
Store Documents Safely in the Meantime
You’ll need to put them in a safe place that isn’t out in the open. This could include a plain old manilla envelope, in the cloud, or even with your tax accountant. Because tax documents contain a lot of sensitive information, be sure you’re storing them securely and out of sight. And remembering where you put them.
The good news is most of us aren’t buying up real estate like candy. So the documents you have to keep longer than seven years? They’ll probably be a much shorter stack. And as for the rest of it, you can feel pretty confident sending it to the shredder after the seven years (from your date of filing) is up.
Larissa Runkle (@therealtorwriter) is a writer and editor living in Colorado. Her work focuses on personal finance, real estate copywriting and lifestyle guides.
