How Long Should You Keep Tax Records: A Guide for Workers

As a worker, it is important to keep track of your tax records. However, with so many tax documents and receipts, it can be difficult to know when it is safe to dispose of certain documents. In this blog post, I will explore how long you should keep different types of tax records before considering disposing of them. By the end of this blog, you will have a better understanding of how long to keep your tax records organized.

Tax Returns

It is generally recommended that you keep your tax returns for at least 3 years after the date you filed or 2 years after you paid the tax, whichever is later. This is because the IRS has up to 3 years to audit your return or 6 years if you underreported your income by more than 25%. It is also important to note that if you file a claim for a loss from bad debt deduction or worthless securities, you must keep your tax returns for at least 7 years.

W-2 Forms and Pay Stubs

For your W-2 forms and pay stubs, it is recommended that you keep these records for at least 1 year. This will ensure you have documentation if there are any discrepancies in your earnings from the previous year. If you are applying for a loan or mortgage, you will need to have several months’ worth of pay stubs handy to provide proof of income.

Investment Records

If you own any investments, it is important to keep all associated records. This includes purchase and sale receipts, statements from brokers and investment firms, and records of reinvested dividends. It is recommended to keep these records for at least 3 years after the date you sell the investment. If there are any losses, keep records for 7 years to ensure you are able to claim any capital losses in the future.

Business-related Tax Records

If you are a small-business owner, it is important to keep all tax-related documents for at least 3 years. This includes any expenses, payroll records, bank statements, and receipts. If you have incurred a loss in your business in one year and would like to carry it forward to the next year, ensure you keep your tax records for that year for at least 7 years.

Property related records

If you own any property, it is important to keep all related documents. This includes documentation of purchase and sale, records of home improvements, and receipts for any expenses relating to the property. Keep these records for at least 7 years after you sell the property or 3 years from the date of the return when the property was sold, whichever is later.?

Conclusion

As a worker, it is important to keep your tax records organized and up to date. Knowing how long to keep each type of document is key to ensuring you never run into issues when filing your tax returns or dealing with any other financial transactions. A general rule of thumb is to keep tax-related records for at least 3 years after the due date of the tax return, but it is always better to keep your records for longer, to avoid any issues with the IRS in the future. By following these guidelines, you can ensure that you are always prepared for any financial situation and keep yourself financially secure for years to come.