While the tax filing deadline is fast approaching, hopefully you're already done and well on your way to receiving a big refund. But don't celebrate just yet. When the filing part of tax season is over, you need to turn your focus to your tax papers and forms, and what to do with them.
Before you do anything, think about this. How long should you keep your tax records? What do you do if you made a mistake on your returns? How can you make sure you pay less next year? And how can you keep your documents secure?
We have answers right here!
1. Save your records (but for how long?)
If you're like almost every other taxpayer in the country, the minute your taxes are filed, you stash your important documents in a box, or in a tax folder on your computer and then forget about them.
You know how it goes. When you dig out all your old taxes next year, someone in your family will invariably say, "How long do you have to keep those?"
What's your answer? Seven years? 10 years? Three years?
When it comes to the correct answer, there's good news and not-so-good news. The good news is, the Internal Revenue Service recommends you keep most tax records for just three years. The not-so-good news is, there's more to it than that.
- Keep your records for at least three years (the IRS can audit your returns that far back)
- Keep employment tax records for four years
- If you claim a bad debt or loss from securities, keep tax records for seven years
- If you forgot to report income that represents 25 percent or more of your annual income, keep tax records for six years
- If you didn't file a return or included incorrect information on it, keep tax records indefinitely
Note: If you own property that you report on your tax return, keep those records until a few years after you sell that property.