As tax season rears its head again this season, you may find yourself wondering what you should keep and what you should shred. The truth is that the question is more difficult than it seems. Some people will need to hold onto certain documents for their entire lives, while others may be able to shred documents right now. Whether you're filing a 1040 form 2018 or puzzling over an old 1040a tax form 2017, here are a few tips to keep everything organized and secure.
What to Shred
The key documents to shred are those related to your tax forms. This includes the following:
- Duplicates of receipts: As you go through your business receipts, take out any duplicates to lighten your filing load.
- Ancient records: Any tax records that exceed the statute of limitations should be shredded.
- Unrelated receipts: If you're not using the receipts (including medical) for your taxes, then they can be shredded.
- Paycheck stubs or social security statement: You do not need to hold onto these records in the event of an audit. Your standard tax forms will provide this information.
All of these documents should be cross-shred to prevent the possibility of the documents being pieced back together. Louisiana Shred provides you with the service you need to ensure that all documents are destroyed properly. Your chances of identity theft increase around tax time, so this is an important step to keep your odds of becoming a victim as low as possible.
Which Documents Should I Keep?
Audits are usually conducted within three years of filing, but you should hold onto many of your documents for longer than that. Records related to loans, mortgages, and deductions may need to be kept longer than seven years if they're still active. Some tax experts recommend keeping capital asset documents for your entire life!
Be sure to keep the following documents:
- Income-related documents: Ensure that all documents that prove your income are kept, including W-2 forms, 1040ez tax form, and IRS form 1040.
- Bank and brokerage statements: Statements that prove where your money is and who it's going to.
- Deduction-related items: All receipts related to deductions, including medical, child support, alimony, and charitable expenses, should be kept.
- Property documents: Mortgages, deeds, and closing statements may be needed for future reference.
Whether keeping these documents in a physical or electronic form, they should be protected. Keep physical documents in a safe or locked cabinet (or drawer), and encrypt files so hackers can't access the information — even if they successfully break into your systems.
Statutes and Shredding
If the IRS suspects that you omitted at least 25% of your income, they are allowed to audit you up to six years after you filed. This is why the income-related documents are so important to keep. However, after seven years, you're typically free to start shredding all the documents that have been piling up in your home safe or filing cabinets.
As you file your 2018 tax forms in 2019, be aware that any documents filed in 2012 (for the 2011 tax year) can be destroyed. However, as mentioned, you should still keep any active loan mortgage, or capital asset documents in case of a future audit.
Contact Louisiana Shred
Louisiana Shred makes it simple to destroy your documents. Our instructions are far easier to follow than IRS form 1040 instructions! Whether you're shredding old documents or old hard drives, we're here to help. You should be shredding old documents every year, so give us a call today to do it the proper way.