Tidy your tax files

Folders in file drawer with handwritten tags

You’ve filed your taxes, so now it’s time to tidy your tax files. It’s important to keep an organized copy of your tax return in an easy-to-find place in case of an IRS audit. Here are some guidelines to follow.

What to keep and for how long

Hold on to your tax return and related documents for at least three years. That’s because the IRS generally has three years from the date you filed your original return (and if you received a refund) to audit you. This timeframe is shortened to two years from the date your taxes were paid, if you owed money.

There are always exceptions to the general rules, like failing to report income or filing a fraudulent return, that would allow the IRS to audit you at any time. To make sure you’re prepared, in addition to keeping a copy of your tax return, keep copies of:

  • W-2s
  • 1099s from your financial institutions and brokerage accounts
  • Proof of any deductions and/or credits you claimed, such as child care expenses, charitable contributions and medical expenses
  • Home and property documents, such as receipts for improvements and closing documents
  • Investment documents, such as 401(k) and brokerage account statements

Ways to organize

The number of pages in your tax return can add up fast, so get organized now. This step will save you both time and headache later if you’re audited. You can keep your tax documents organized using either a digital or paper filing system.

If you prefer to keep digital copies of tax returns, make sure you save them on a secure drive and password protect them. Never save copies of anything with personal information on public computers or a computer you don’t have complete control over. Create a backup on a removable drive or use a secure cloud app solution, in case your computer crashes. If your app has the capability, you can also password protect the individual digital file. Scan the related receipts and other documents and place them in the same file together just as you would do with a paper-filing system.

If you opt to keep paper copies of tax returns on hand, invest in a fireproof, lockable file cabinet that can’t easily be moved. This step keeps your documents safer in the event of an emergency like a fire or burglary.

Knowing the IRS’ general guidelines for keeping files and having a system in place for staying organized is key if you’re ever faced with an audit. 

The advice provided is for informational purposes only. Contact a tax advisor for additional guidance.

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