Tax Records: To Keep or Not to Keep

​Q: Now that tax season is over, what documents should I keep, and which can I throw away?  
A: According to the IRS, you should keep a copy of your tax returns and all return-related, substantiating documents. If your returns are selected for audit, the IRS typically will ask to review your wage and other income statements, plus receipts and logs or schedules for qualifying expenses.
 
Q: How long do I need to keep my tax records?
A: Most taxpayers only need to keep tax returns and associated return-related records going back three tax years, according to Jennifer Jenkins, IRS spokesperson in Columbus. You should hold some documents, including records relating to real estate, stock transactions, retirement accounts and business or rental property, a while longer. These records can help establish cost basis and gain or loss, which you may need to determine gross income in future years.
 
Q: What kinds of records are considered “tax records”?
A: Tax records can include bills, credit card, canceled checks and other receipts, invoices, mileage logs, proofs of payment and any other records that support deductions or credits claimed on a tax return. In most cases, the IRS does not require taxpayers to keep records in any particular way.
 
Q: What if I didn’t file my return last year?
A:  The filing requirement is primarily based on income level, so not everyone is required to file. If you were supposed to file, but didn’t, unless you can provide a reasonable explanation for failing to file, you can be held accountable for back taxes due, plus penalties and interest. The three-year limit on back taxes, penalties and interest does not apply to those who file false or fraudulent returns or willfully attempt to evade taxation.
 
Q:  How should I dispose of my tax records?
A: IRS policy provides specific guidance on techniques to sanitize information by clearing, purging and destroying personally identifiable information (PII) based on how the information is stored. The IRS recommends that paper documents get cross-cut shredded into 5/16 inch wide or smaller strips, or that they be completely burned. Depending on the type of magnetic media, the IRS generally recommends a combination of overwriting and “degaussing” (a process used to erase hidden magnetic data that may be stored on a computer), followed by incinerating, shredding, pulverizing, disintegrating or grinding.
 
Q: Where can I get more information about retaining and disposing of tax information?
A: For more information on what kinds of records to keep and recommended document disposal methods, see IRS Publication 17, Your Federal Income Tax ("What Records Should I Keep?" in Chapter 1), and IRS Publication 1075, Tax Information Security Guidelines for Federal, State and Local Agencies and Entities, which are available on the IRS website at www.irs.gov.
 
5/1/2015
 
The information for this “Law You Can Use” column was provided by the Internal Revenue Service (IRS). It was prepared by the Ohio State Bar Association.

Articles appearing in this column are intended to provide broad, general information about the law. This article is not intended to be legal advice. Before applying this information to a specific legal problem, readers are urged to seek advice from a licensed attorney.

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