Tax records: Keep or shred?

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Unless you are someone who likes to wait until the last minute, chances are that you have already filed your 2013 income tax return. And maybe, unless you are someone who is very neat and tidy, the papers you used to do so are still in a messy pile on your desk.

You may have stared at the pile of W2s, property tax statements, receipts and other papers, and contemplated putting them right into the shredder. But you probably decided that wouldn’t be a good idea in case you get audited, which was a good decision to make.

Typically, it’s best to keep all documents that support your both your income and deductions you claimed on your tax return for at least three years from the date you filed. For 2013 tax return documents, that means at least spring of 2017.

However, if you filed a claim for a deduction involving a loss from worthless securities or bad debt, you will want to keep your records for at least seven years to be safe.

Essentially, the IRS has three years to audit you from the time you file and you have the same amount of time to amend your return. But keep in mind that if fraud was involved, the IRS can examine your past records and ask for back taxes indefinitely.

Taxes are serious business, which is why many tax attorneys will recommend keeping your records indefinitely. Nowadays, this is made very easy with computers and scanners. You can scan and file the records electronically, which doesn’t require any space in your home or office.

Just make sure you back-up the electronic files in a way that’s secure. Additionally, when getting rid of any paper files that identify personal information, be sure to shred them instead of just throwing them into the trash.

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