Welcome Robin Bowlus - Thirty-One independent consultant newest Icon advertiser
Spring's warming temperatures have been known to inspire bouts of cleaning. Taming the growing pile of household paperwork is one potential task, but what documents should be kept, and which can be thrown away? The Internal Revenue Service offers some timely advice for those bitten by the spring cleaning bug.
According to the IRS, taxpayers should keep a copy of their tax returns and all return-related, substantiating documents. The IRS typically requests to review wage and other income statements, plus receipts for qualifying expenses, for those tax returns selected for audit.
"Most taxpayers only need to keep tax records going back three years," said Jennifer Jenkins, IRS spokesperson in Columbus. "You'll want to hold onto some documents a bit longer. Records relating to real estate, stock transactions, retirement accounts and business or rental property can help establish cost basis and gain or loss, which is needed to determine gross income potentially years down the road."
Jenkins said tax records can include bills, credit card, canceled checks and other receipts, invoices, mileage logs, proofs of payment and any other records that support deductions or credits claimed on a tax return. In most cases, the IRS does not require taxpayers to keep records in any particular manner.
The three-year statute doesn't apply to tax dodgers, though. "Those who file a false or fraudulent return, willfully attempt to evade tax, and/or fail to file a return, can be held accountable for back taxes due well beyond the three year limit that applies to the average taxpayer," Jenkins said. "And, don't forget the penalties and interest."
Proper disposal of personally identifiable information (PII) and financial information is another consideration for springtime cleaners. IRS policy provides specific guidance on techniques to sanitize information by clearing, purging and destroying the information based on how the information is stored. IRS recommends that paper documents get cross-cut shredded to effect 5/16 inch-wide or smaller strips, or completely burned. Depending on the type of magnetic media, the IRS generally recommends a combination of overwriting and Degaussing, followed by incinerating, shredding, pulverizing, disintegrating or grinding.
For more information on what kinds of records to keep and recommended document disposal methods, see IRS Publication 552, Recordkeeping for Individuals, and IRS Publication 1075, Tax Information Security Guidelines for Federal, State and Local Agencies and Entities, which are available on the IRS website at www.irs.gov or by calling 1-800-TAX-FORM.