Tax Records You Can Toss

Kiplinger reports:

The IRS generally has up to three years after the tax-filing deadline to initiate an audit, so you should hold on to supporting documents for at least that long. Those documents include credit-card statements, canceled checks, debit-card transactions and receipts showing deductions; letters from charities reporting gifts; and paperwork reporting mortgage interest, capital-gains distributions and income. “A few months ago, we saw an influx of clients getting letters from the IRS about their 2011 returns,” says Laurie Ziegler, an enrolled agent in Saukville, Wis., and a director on the board of the National Association of Enrolled Agents (enrolled agents are authorized to represent clients in front of the IRS). See IRS Publication 552, Recordkeeping for Individuals, for more information about tax records.

Most people can safely shred those supporting documents three years after the tax-filing deadline. But people who are self-employed or who have a small business, income from a variety of sources or complex tax situations should keep their records longer. The IRS has up to six years to audit people who neglect to report more than 25% of their income. Ziegler usually keeps her tax files for seven years, just to be safe. “I keep everything in a box,” she says. “When I put the most current year in, I pull out the oldest year and shred it.” Shred the old documents rather than just throwing them away, so you don’t create a treasure trove of personal information for ID thieves.

An article worth your time.