What Documents to Toss When Your Taxes are Done AARP The Magazine
What Documents to Toss When Your Taxes are Done - AARP The Magazine
Your greatest risk of an IRS audit is the three years after a tax return's due date, so keep records for your 2010 return until at least April 2014. The IRS can extend that span by three years if it suspects you underreported your income by 25 percent or more (there's no time limit if you're suspected of fraud). Keep records for an asset, such as a home or stock, for as long as you own it plus three years (seven years if you claim a deduction for a worthless security). Store W-2 forms until you begin receiving Social Security benefits.
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Clear the Clutter After Tax Season
Expert advice on what to keep and what to pitch
Dear Liz: I'm drowning in tax paperwork. I have no idea what and what I can toss, so I hang on to everything. Help! Art Streiber Liz Weston's latest book is the 10 Commandments of Money. It sounds like your file cabinet is a fire hazard. Now that is over, let's unpaper your life. The IRS accepts electronic documents, so there's no reason to cling to dead-tree versions of your data. Most financial institutions dislike mailing you statements as much as you hate storing them. So start downloading monthly statements or — even better — let the institution store them. Some let you access files online dating back 10 years, though you may face fees to retrieve older information. Ask your financial institution about its policies. To create digital versions of your existing records, you can buy an all-in-one scanner/copier/fax machine for $100 or so. Scan forms that verify your reported income (such as your W-2 or a 1099) as well as tax-related receipts and financial statements from the past three years. If you store scanned documents on your computer, create backups: Copy your records to CDs or a USB drive and keep them in a safe-deposit box, or use an online storage service such as Mozy or Carbonite for as little as $50 a year. Not comfortable going paperless? You can still thin out your records. You should keep your tax returns indefinitely (you or your heirs may need the info), but you can shred supporting documentation after three years, when the risk of an audit is reduced.When to pitch tax documents
Your greatest risk of an IRS audit is the three years after a tax return's due date, so keep records for your 2010 return until at least April 2014. The IRS can extend that span by three years if it suspects you underreported your income by 25 percent or more (there's no time limit if you're suspected of fraud). Keep records for an asset, such as a home or stock, for as long as you own it plus three years (seven years if you claim a deduction for a worthless security). Store W-2 forms until you begin receiving Social Security benefits.
More on Taxes
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