As we bounce into spring here is one important step you can take to clean your financial House.
Know how long to keep paperwork
Here’s what to keep, and for how long:
Copies of your tax returns. Keep these forever. “They help in preparing future tax returns and making computations if you file an amended return.
Supporting tax documents and receipts. The IRS recommends keeping supporting documents for as long as you can be audited or held responsible for the filings. Here are a few rules of thumb:
- The IRS generally audits taxes back three years, so keep records supporting deductions at least three years after a return was due or filed. However, the IRS also says: “If we identify a substantial error, we may add additional years. We usually don’t go back more than the last six years.” So you may want to hold onto records for six years to be sure you’re covered.
- Keep payroll tax records six years.
- If you filed a fraudulent tax return, you’re on the hook forever, so hold onto supporting documents.
- If you failed to report income worth more than 25 percent of the gross amount you reported, you’re liable to the IRS for six years.