With the end of 2020’s first month, you may be starting to pull out your old tax files and gathering your W-2s and 1099s, preparing for the tax madness that’s just around the corner. (It’ll be here before you know it!)
You may also find yourself overwhelmed with the sheer volume of papers stuffed into your old tax files.
The beginning of a new year is a great time to clean out old things we no longer need, and the same can go for your financial filing cabinet.
BUT it’s important to know how long you need to keep past filings and documents before sending it all to the shredder.
Why do you need to keep old tax filings or statements?
It’s possible that your tax returns could be audited after you file. If that happens, you’ll have to hand over the supporting documents you used to prepare and file your tax returns. So by keeping them, you’re doing “future-you” a big favor!
How long do you need to keep old tax filings or statements?
In most cases, keeping old tax returns and documents for 3 years is sufficient. That’s the period of limitations that applies to tax returns without any oddities (such as not filing one at all or not reporting income you should have). Plus, you’re able to go back and amend tax filings that are 3 years or less old.
But just to be safe, keep at least 7 years’ worth of old tax files and their supporting documents such as W-2s, 1099s, receipts, etc.
See the IRS’s full list of reasons why you would need to keep tax returns and documents for longer than three years.
THE BOTTOM LINE:
By the end of January, here are the 3 steps you need to take to get ready for tax season and do some financial clean up:
(1) Review and organize old statements and tax filings
(2) Keep any tax filings and supporting documents from the past three years (2018, 2017, 2016)
(3) Scan anything older than three years, save in a secure electronic location, shred, and toss!
Bonus step: Schedule an appointment with your CPA or tax adviser. Their calendars are already filling up!