To Shred or Not to Shred…
With tax season coming to an end, it’s a good time to organize your documents and properly dispose of any records you no longer need. In most cases, the IRS only has three years after the due date of your return (or the date you filed) to perform an audit. It’s a good idea to keep your tax returns indefinitely, but you certainly don’t need to hold onto all of your documents.
Here’s a guide to what you can shred and when:
After Three Years:
- W-2s: You can shred pay stubs after you’ve checked them against your W-2s
- 1099s: Capital gains, dividends, interest on investments
- 1098s: If you deducted mortgage interest
- Canceled Checks and receipts for charitable contributions
- Records relating to eligible expenses for withdrawals from health savings accounts and 529 college-savings plans, as well as contributions to a tax-deductible retirement-savings plan, such as a traditional IRA
After Six Years:
- Receipts for business income and expenses, if you’re self-employed
Special Situations:
- Records of contributions to a nondeductible IRA: three years after the account is depleted
- Investing records showing purchases in a taxable account: three years after you’ve sold the investments
- Home-purchase documents and receipts for home improvements: three years after you’ve sold the home
- Documents relating to the loss of worthless securities: three years after you’ve claimed the loss on your return
- Records relating to the loss from bad debt: three years after you’ve claimed it