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You
probably have dozens of documents you know you should hold on to, whether
they're in clearly labeled, well-organized files or scattered around your house
or office. Trouble is, when you finally get a chance to sort through them and
weed out the ones you don't need anymore, it's not always easy to know what's
essential and what isn't.
That's
why I created the charts on the following pages. Keep in mind that what often
separates the papers you need -- and how long you keep them -- is whether
they're related to anything you deducted when you filed a tax
return.
Save every tax-related
document for at least three years after you file the return, which is the
length of time that the IRS has to determine that you owe additional taxes --
that is, if you reported all of your income. If you didn't, and the amount that
you didn't report is more than 25% of the gross income on your tax return, the
IRS has six years to assess additional tax. And if you didn't file a return or
filed a fraudulent one, the IRS can knock on your door
anytime.
However, you might want to save most tax-related documents for seven years
or more -- even though that's longer than the IRS and some accountants
recommend. (We'd rather be pack rats than show up empty-handed to meet with
someone from the IRS.)
Of
course, you should keep the most recent version of legal documents, such as a
will, forever. But as for bills, statements and receipts for items and services
that you aren't deducting -- it's your call. Just remember -- shredding is the best way
to dispose of papers with your account or Social Security number on
them.
For the
official IRS guidelines, read Publication 552: Recordkeeping for
Individuals.
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