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Ah spring is here! It’s a great time to tackle those projects you’ve been putting off all winter like a closet cleanout or that dreaded window washing. Don’t forget to clean out your tax files too. This is a great time of year to thin the herd, so to speak. Many of us tend to hold onto those tax documents and tax returns and supporting documents much longer than necessary. You may need that someday, right? Maybe you’re an admitted paper hoarder, but you’re now finally ready to purge and free up some space in the filing cabinet. You’re probably wondering how long to keep personal tax records. Here are some guidelines so you get it right.

Income tax returns:

The general rule, according to the IRS, is to keep your tax return for three years from the date of filing (or two years from the date you paid your tax bill). The IRS says be sure to also keep the supporting documents, like your W-2s and 1099s. The reason for the three years: that’s how much time you have to amend that tax return and how much time the IRS has to impose further tax.

Exceptions:

Of course there are always some exceptions…

1. You need to keep personal tax records for six years if you’re not reporting income that you should be, and that income is over 25 percent of the gross income reported on your return.
2. You need to keep records for seven years if you file a claim for a loss from worthless securities.
3. You need to keep records indefinitely if you don’t file a tax return or if you file a fraudulent return (hopefully you’re not in this category!)

What to pitch and what to keep:

It’s hard to know when you open up that jam-packed filing cabinet at home what you can ditch and what you can’t. Just remember, not all documents are created equal. For example, any documents related to property. The IRS says you should hang onto records related to property until the period of limitations expires for the year you sell or dispose of the property.

Something else to keep in mind:

Just because you don’t need supporting documents for tax purposes anymore doesn’t necessarily mean you can pitch them. Some insurance companies and creditors may ask that you hold onto them longer than the IRS. 

State returns:

Double check with your state department of taxation or your tax preparer regarding how long you should keep a copy of your state tax return. This will obviously vary from state to state. The Ohio Department of Taxation says to keep copies of your state tax returns for at least 4 years from the deadline or the date you filed.

A couple of other thoughts:

• Keep a copy. If you file your taxes online, you need to remember to always print out a copy of your return (and keep supporting documents) before you hit send to electronically submit your return. Don’t assume that there’s an online copy somewhere you’ll have access to. Be sure to print a copy for yourself if you file a paper return as well. 
• If you’re moving away from paper files at home to an electronic filing system, it goes without saying that you should finely shred the paper documents once the information is safely stored (and backed up) electronically.

Happy purging!

GJM Tax Partner Kathi Iott contributed this blog. With over 20 years in public accounting, Kathy helps both individuals and businesses with tax strategy. She works across many industries, including construction and real estate.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting services and provides comprehensive services including assurance, business advisory, tax, risk advisory and healthcare management. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.