As a CPA, I’d rather not shuffle through a slew of unnecessary documents. In fact, my office is (mostly) paperless. If you don’t need a document anymore, save it in the cloud then get rid of it!
I understand why some of my clients hoard tax documents – you are nervous about a potential audit or unsure of what you need, so you play it safe by keeping ev-er-ry thing. I want you to know that this method just confuses the whole process and everyone involved (stressing out your already stressed out tax lady).
I’m urging you to look through your pile of documents right now and throw out all the dead weight. Here are three *general* and *easy* suggestions you can follow to do that:
✔️ Keep all documents three years or younger
✔️ Throw out any document that is older than seven years
✔️ Upload or scan everything to a trusted cloud based service
Those suggestions will be simple enough to maintain a clean collection. If you need to do a deeper clean, check out the IRS guidelines:
1.Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.
2. Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.
3. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
4. Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
5. Keep records indefinitely if you do not file a return.
6. Keep records indefinitely if you file a fraudulent return.
7. Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.
If you follow these guidelines, you will be more than fine. And your tax lady will be just regular level stressed per usual during this time of the year. *wink*