If taxpayers are still keeping old tax returns and receipts stuffed in a shoebox in the back of the closet, they might want to rethink that approach. Everything you have to track for the IRS can be done digitally. Since there’s no real downside to holding onto electronic records, you can keep digital records indefinitely. Now is a good time to switch to e-delivery of all financial records. Benefits include quicker delivery, better security, easier to organize and retrieve, saves time and reduces paper clutter. Most financial institutions offer up to 7 years of retrieval.
Generally, the IRS recommends keeping copies of tax returns and supporting documents at least three years. Some believe the rule of thumb for documents should be up to seven years in case a taxpayer needs to file an amended return or if questions arise. Keep records relating to real estate up to seven years after disposing of the property.
Health care information statements should be kept with other tax records. Taxpayers do not need to send these forms to IRS as proof of health coverage. The records taxpayers should keep include records of any employer-provided coverage, premiums paid, advance payments of the premium tax credit received and type of coverage. Taxpayers should keep these — as they do other tax records — generally for three years after they file their tax returns.
The IRS accepts digital documentation, so if you’re going paperless, you may dispose of paper records. Be sure to shred your paper since the information may be confidential. If you’re throwing things out and you’re not sure, scan it and then throw it out.