Can you destroy tax documents?
The rules are a bit tricky about which documents you can destroy and when you can destroy them. These rules are also very specific. For instance, if you file your tax returns properly and on time, under current law, you must keep your tax documents for three years from the date you filed, or two years from the date you paid the tax, whichever date is later.
However, there is a massive push by the IRS to extend the limit to six years, so many CPAs and tax advisors recommend keeping your tax documents a minimum of six years before hosting your own private financial record shredding party.
When it comes to tax documents concerning stocks, bonds, and IRAs, you should hold on to investment documentation as long as you maintain the investments, and for three years after filing relevant tax returns after divesting the investments. Some advisors may recommend holding on to them for six years for added security.
A word of warning, though: if you neglected to file, there is no statute of limitations. Even if you have a valid reason for failing to file, you must retain documentation. Having the appropriate documentation may prove invaluable in heading off a major audit for the tax year(s) in question. Valid excuses may include:
- Returning to school.
- Caring for a sick relative.
- Family leave.
While these are the guidelines for which personal tax documents you can get rid of and when, the rules for businesses are a little different.