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Tax-related paperwork can quickly pile up, but by understanding what to retain and for how long, you can minimize the clutter.
The IRS has a window of up to three years to start an audit, so it's important to hold onto supporting documents for at least this period. This includes W-2s, 1099s, dividend proofs, capital gains reports, charitable donation slips, bank statements, and other records related to deductions and credits.
For those who are self-employed or run a small business, it's crucial to keep tax-related documents for at least six years, as the IRS can audit you within that time if you fail to report 25% or more of your income.
Documents that should be kept even longer include your filed tax returns, records of home improvements, proof of reinvested dividends, and details of stock and mutual fund purchases in taxable accounts.
Starting with the 2014 tax year, it's required to retain proof of minimum health insurance coverage or a qualified exemption.
Consider scanning your tax documents and storing them digitally if you'd rather avoid cluttering up your space with piles of paper.
Photo by Joel Bez.
