Taxes and Recordkeeping

What Records Should I Keep for My Taxes Next Year and Beyond?

Recordkeeping for income taxes used to mean tossing receipts into an old shoebox in the closet—thankfully, things are very different now.

Here are the rules of thumb to remember when it comes to accessing and keeping your important tax documents.

Do I have to wait for my Form W-2 to arrive in the mail?

For most employees, no—many employers email a link to an electronic W-2 that can be downloaded and printed for your records or copied to your cloud storage.

That’s also being done with a number of financial reporting forms that used to be mailed to you. Everything from investment interest statements to student loan reporting is usually available electronically. Check with your financial institution, broker, or education institution, because electronic availability isn’t quite universal just yet, but it is common and growing.

How should I store my tax documents?

We recommend you store your tax documents digitally, organized by tax year, and backed up to another drive or cloud storage to be safe. If you still get paper forms, make sure to scan them and keep a copy in a safe location.

How should I back up my important tax info?

There are a couple of basic rules for keeping your personal financial records safe and accessible. One is to keep more than one copy of important documents or records. Second, make sure at least one of those copies is kept somewhere besides your home or business. This is called “off-site storage,” and it’s been a basic tenet of sound recordkeeping for years.

Resist the temptation to simply keep your electronic records only on your computer hard drive. Granted, there’s a good chance it will be there the next time you do your taxes, but hard drives fail, usually at the worst possible times. You need more durable storage – and in another place. There are many reasonable, cloud storage options available if you’d rather not fool with a portable drive.

How long should I keep tax records?

Some records – receipts from charities, cancelled checks for medical deductions, your W-2s – should be kept for three years. That’s how long the IRS has to audit your finances. And this information, providing you stashed it away, can help prove you deserve the deductions or credits you took.

But there are circumstances that will extend the IRS’s auditing timeframe. Under-report your income by 25% or more, and they can audit you up to six years after you file. And if you don’t file at all, there is no cutoff – you can be audited indefinitely.

For this tax year and two years previous, you need to keep copies of your returns along with documents such as:

• Receipts showing cash contributions to charities
• Medical expenses not covered by insurance

Some records need to be kept even after you’re out of the woods, audit-wise. For example, keep a copy of your income tax return and the IRS acknowledgement or acceptance document for every year you’ve filed. If the return is four years old or older, you can destroy the supporting documents – all those receipts and so forth – but keep the return itself and the IRS confirmation.

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