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If you’ve crossed the finish line and already filed your taxes this year, remember to keep that info in a secure place.
As a rule of thumb, you should keep your tax records for at least three years from the filing date, experts say, due to the statute of limitations for an IRS audit. Some experts advise keeping your records for even longer — up to seven years — depending on your tax situation for the year.
This goes for anything like tax returns, W2s, 1099s or other paperwork that will support deductions or credits that you have claimed.
“The safest place to keep your documents is a safe deposit box,” says Michael Belfer, partner at accounting firm Anchin. “Be neat and organized. If you’re being audited, the more organized you are the better. If you’re messy or don’t have the right documents, an IRS agent may dig a little deeper.”
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3-year rule
You can benefit from keeping your records for three years because that is the set amount of time to claim tax refunds. The IRS generally will go back that amount of time if they need to verify what you have claimed on your taxes.
To be sure, it may be best to keep your records indefinitely. If you don’t file, the IRS has no statute of limitations. Also, if you’ve underreported your income by 25% or more, the IRS can go back six years.
Remember to be safe and secure. If you decide to throw out your records, you should shred them.
State documents
For state income taxes, it depends. Some states can look back further than the IRS. California and Arizona, for instance, have a four-year statute of limitations while Montana’s is five years. The period for investigating if the return underreports income or falsifies data may also be longer.
Other tax-related documents
You should keep records on stocks, bonds or your house longer than the statute of limitations, experts say. If you claim a loss on securities, for instance, you should keep those records for seven years. You’ll also need to keep records if you sell a house, including the purchase price or any improvements you’ve made in order to calculate capital gains taxes.
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