How long to keep tax papers?

[apricot]

I tried searching through the organizing threads and couldn't find anything on this. I've heard 7 years and 10 years. Which is correct? Are there exceptions?

[RobertaD]

I've always heard 7 yrs with exceptions on any impovements to your home, investments, etc. that you would need to keep those records until you would sell to track the improvement expenses and purchase prices.

Roberta

[AnnaInOhio]

Apricot

I actually started a thread on here about a year ago on this subject because of some things I found out but here goes.

Keep them Forever!!!

I was in Walmarts and talking with a guy from Diet Rite. He had received a notice from the IRS that he owed back taxes from 1985, they couldn't prove it but said thats what the computer says so it is so. They charged him something like $10,000 in penalties/interest from 1985 forward. He had of course thrown out all his tax returns/W2's because it was over 7 years ago, his employer too. They suggested contacting Social Security but they only keep the total for the year, not how much was withheld in taxes. I checked with my accountant and said that "Oh yes, she had had clients with the exact same problem. So my suggestion is buy some of those tie binder things, put each years tax returns in there and put it somewhere safe. If you have a scanner with your computer, you could also scan them and put them on a CD and put in a safety deposit box as well in case of fire. What a PITA especially for us as we have a business too but the alternative could be loosing your home and everything else, the IRS does not play nice. They threatened this guy who is close to retirement with taking his home, cars and even his furniture.

Anna

[apricot]

That's strange the IRS would go back that far and insist that he pay them penalities, etc. It seems like that would happen to somebody who hadn't filed in years or something but you never know. I was hoping to gain more storage space and don't have room to keep tax papers forever but the scanner and CD idea sounds good.

[KSJEn6891]

I usually keep the everything regarding Tax season for 7 years, after that I only save the paper work and "filling receipt" for about 10 years, and after that it is usually just the receipt from filling. It is too much of a fire hazard to keep all those "papers" for a long time. The flip side to all of this is that we do keep a lot of "old" computer filed / scanned/ documented papers on discs when ever we back-up all of our PC records. Pictures are on their own disc, documents on theirs, and so forth... Some are even in fire safe (X* of heat/flame protected) security boxes. The boxes don't use as much space as cardboard boxes can, and we can keep more files in one place, not to mention protected.

[apricot]

Thanks. I need to get one of those fire safe boxes. Unfortunately, mine are just in a cardboard box in the hall closet, which I know is not safe. I was going through them and some of the receipts from 10 years ago have totally faded so are useless anyway. When I was working for a service at home I saved the few important papers that I had and gave them to dh when he was using Turbo Tax and somehow he forgot to include them so we got penalized for that and had to pay extra with penalties the next year. That was less than 10 years ago. We've never been divorced and our biggest investments are the house and some bonds.

I worked with someone who had an issue with an ex-husband over some financial things and said she had her taxes from over 20 years ago but they are stored in a cardboard box in a rented storage place, which isn't too safe either.