Tax season is no fun, and once it’s over all you want to do is get the whole mess out of sight and out of mind. It’s never a good idea to throw out tax papers, not even after three years. True, the IRS has a three-year statute, but that statute is not so black and white. Plus, different states have their own different statutes. Because of these complications, it’s best to find a way to safely store and protect tax papers, in case you need to refer to them years down the road.
Which Forms Should You Keep?
If a file provides information relevant to your tax return, keep it. This includes things like 1099s, W-2s, and mortgage interest statements. You should also keep copies of your tax returns and the corresponding forms and schedules. Anyone filing self-employment taxes should hold on to paperwork that proves their income and expenses.
Back Up Paper with Digital and Digital with Paper
It’s tempting to just scan in your tax documents, save them digitally, and then toss out the paper copies. However, with digital storage there is risk of computers crashing or hackers stealing files. For this reason, it’s important to have paper copies as well. Consider keeping multiple copies, both digitally and physically, as paper files have the potential to be damaged by disasters like floods and fires.
Keeping Tax Papers Organized
Perhaps the best way to keep your tax papers organized is doing so by year. If you have space in a filing cabinet at home, designate a portion of a drawer to tax papers, and use separate folders for each year. If you do not have space in a filing cabinet, you can use a box with envelopes for each year. It’s never a bad idea to keep multiple copies of paper documents. If you have the option, keep a box of organized tax papers at home and identical box in a secure, climate-controlled storage space.