Taxes done! Documents to keep, documents to toss

IRS can audit up to 3 years back

(CNN) — Now that tax season is over, it’s tempting to toss all that paperwork too. But not so fast. Some documents may be important down the line.

Free post-tax shredding events
Free post-tax shredding events

Federal and state income tax returns should be kept for a minimum of seven years. The IRS can audit a return at random up to three years from the date it was filed, and taxpayers will also need supporting documents like W-2 forms, investment purchase statements, and credit card bills to prove deductions if necessary.

Note that if you’ve under-reported income by 25 percent, the IRS can go six years back, or even seven if you claim a loss for bad debt or worthless securities.

It’s easy to save returns when they’re filed electronically. Those still filing on paper should scan and save all documents to cut down clutter.

  • What can get tossed?
  • Receipts that don’t have anything to do with a tax return,
  • Pay stubs, since that information is on a w-2,
  • Monthly investment statements.
  • And loan documents for items you no longer own.

Certain important items should always be kept, preferably under lock-and-key, including:-

  • Birth and death certificates
  • Estate-planning documents and wills
  • Marriage licenses and divorce papers,
  • Military discharge documents,
  • And social security cards.

For discarded documents, shred them to avoid identity theft. Look locally for free shredding events, which tend to happen during this post-tax season time of year.

Follow Karin on Twitter: @karincaifaCNN

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