Now that tax season is over, what should you do? You would have lots of paper documents – tax forms, invoices, receipts, bank and credit card statements, dividend and bonus statements, check buds, canceled checks, payment slips, mileage records, etc – you would have used or referred to for your income tax submission. According to the IRS, you should keep all these documents for at least 3 years for the purposes of reference in the event of an audit. The 3 years is called the statute of limitations. This means the IRS has 3 years to review your submission and call for an audit in the event of any discrepancy or irregularity.
But documents such as records having to do with real estate, stock transactions, retirement accounts, and business or rental property that help determine a cost basis for any gains or losses in the future should be kept for more than 3 years.
In cases that are criminal or fraudulent, the IRS is not bound to any time limit in calling for an audit. IRS spokesperson Jennifer Jenkins says, “Those who file a false or fraudulent return, willfully attempt to evade tax and/or fail to file a return can be held accountable for back taxes well beyond the three-year limit that applies to the average taxpayer. And don’t forget the penalties and interest.”
According to Ms. Jenkins, if you decide to get rid of any tax-related document, you should do so in the proper way. This is to avoid it being used or copied by another person for fraudulent purposes. Identity thieves and criminals who steal income tax refunds prey on those who discard their documents carelessly.
Paper documents get cross-cut shredded into strips not exceeding 5/16 of an inch wide, or burned. For magnetic records, the IRS generally recommends a combination of overwriting and degaussing, followed by incinerating, shredding, pulverizing, disintegrating, or grinding.
For more information on what documents to keep and which to discard, visit the IRS website at www.irs.gov and look for IRS Publication 552, Recordkeeping for Individuals, or publication 1075, Tax Information Security Guidelines for Federal, State, and Local Agencies and Entities. Alternatively, you can also call (813) 295-7648.