When & What to Shred
Tax returns are a veritable buffet of personally identifiable information, which means identity thieves would love to get their hands on your return or any of the documents you used to file it. Shredding tax returns and sensitive financial documents is one of the best ways to keep data safe. Before you permanently destroy documents, be sure to follow IRS guidelines about retention timeframes.
IRS Statute of Limitations
The IRS offers vague answers about when information can be destroyed. According to the IRS website, information should be kept as long as proof may be required regarding the expense, action, or income. As long as there is any chance an audit might occur, you should keep data that backs up your tax return claims.
The statute of limitations for a clean tax return — one that does not indicate a substantial error — is three years. According to its website, the IRS doesn’t generally go back more than six years even in the presence of a mistake or error. Shredding tax returns after three years if you are comfortable with the accuracy of your return; shred documents after six years if you have any concerns.
Specific Document Guidelines from the IRS
The IRS does provide some guidelines for specific document types. Payroll records should be maintained for six years. Once you’ve hit the six year mark, conduct a review to ensure there is no reason for keeping specific documents longer, such as a dispute regarding withholdings. The IRS suggests keeping documents regarding assets the entire time you have the asset plus an additional three years.
Shredding Tax Returns
Tax returns can be included in normal bulk shredding through your regular shredding vendor (if you don’t have one, call Sergeant Shredder… if you do have one, call Sergeant Shredder ;). Deposit forms and documents into collection bins or drop them off during a one-time shredding service. If your home or business uses an annual shredding service, scheduling it just after tax time lets you purge records of the oldest and unnecessary documents as you file current documents.
Is shredding tax returns on your to-do list this tax season?