Once you are done filing your tax returns, what should you do with all the receipts, forms, and other paperwork? Should you just shred them and reduce the clutter or keep them?

The IRS recommends that you should keep any documents that prove how much income you have earned and any other documents that support deductions or credits you claim. However, if you will get one record (like your W-2) at the end of the year that summarizes all the crucial information, you don’t have to worry about keeping every single document. 

The IRS has 3 years after the due date of your tax return or when you filed if later to trigger an audit, so it’s advised to keep the records until that time has passed. 

But, in a few cases, you should keep the records even longer. For example, cost basis informations for assets you may sell later.

Pro Tip: You should keep your W-2 forms around for non-tax purposes as well. For example, if you ever need to apply for Social Security Benefits, you will need your W-2 to verify your income.

Documents that should be kept for 1 year

You should keep your pay slips at least until you can check them against your W-2 forms. If all the figures match, feel free to get rid of the stubs. The same goes for your monthly brokerage statements; only shred them once you have matched them up with your 1099s and year-end statements. 

Documents that should be kept for 3 years

Any documents that support your income, credits, and deductions claimed on your return should be maintained for at least 3 years after the tax-filing deadline has passed. This 3-year rule also applies to the following records:

• Form 1098, if you deducted mortgage interest
• Form 1099s that show your capital gains, income, interest, and dividends on investments
• Form W-2s that report your income
• Documents showing your contributions to a tax-deductible retirement-savings account, such as an IRA
• Documents showing eligible expenses for withdrawals from 529 college-savings plans and Health Savings Accounts.
• Receipts and/or cancelled checks for charitable contributions 
• Records related to the property you own or your investments even after you sell
• Investing records showing your transactions for mutual funds, bonds, stocks, and other investment purchases after you sell them
• Keep documents related to any property you inherit or receive as a gift after you sell/dispose the property.

If you no longer itemize deductions on Schedule A due to the significant increase in the standard deduction in the beginning of 2018, you might not need to save as many records. For example, people who don’t deduct charitable contributions any longer, they don’t need to hold onto the cancelled checks or donation receipts for tax purposes.

Documents that should be kept for 6 years

If you have failed to report at least 25% of your income, the IRS has up to 6 years to initiate an audit. This is especially important for freelancers and self-employed people; you may earn business income from a variety of sources and may have overlooked some amount. 

So, practice caution and keep your 1099s and other receipts of business expenses for at least 6 years.

Documents that should be kept for 10 years

Have you ever paid taxes to a foreign government? If yes, then you might be eligible to a deduction or a credit on your US tax returns (depending on what you want).

If you decided to claim a deduction in the past, you are allowed to change your mind within ten years and instead claim a credit via filing an amended return. 

Also, if you previously claimed foreign tax credit, you have 10 years to correct it. 

This is why it’s best to save any documents and receipts related to foreign tax payments for at least 10 years.

How to Store Your Tax Documents

There is no official, IRS-recommended way to keep your tax records; just keep them in an organized manner. Some people prefer storing their records digitally while some prefer the old-fashioned paper records. 

Consider organizing your documents first by year, and then by category (like income forms and bank statements). If you are going the digital route, just take pictures or scan the documents and store them anywhere you want (in a Dropbox or iCloud).

Or, you can buy a good-quality file folder and store your receipts there.

Keep saving and arranging your records throughout the year so you have everything neat and tidy during the tax season.