After filing your taxes have you been left with stacks of documents and not quite sure what to do with them? Storing tax records and back-up documentation in a secure location, can quickly fill up your filing cabinets, storage rooms, and hard drives over the years.
Also, the information that you send electronically to your accountant, tax preparation advisor, or directly to the IRS contains sensitive and private data that could become a target for identity thieves and fraudsters seeking to steal your tax refund.
New data from the Federal Trade Commission suggests that tax identity theft is a growing concern. If someone files a fraudulent return with your information, you may not find out until you file your own return. When identity theft or tax return theft does occur, it is a time-consuming and complicated process to reverse.
One solution is to prevent fraud from occurring by …….
HOW TO PROTECT YOUR INFORMATION AND IDENTITY
WHAT SHOULD I KEEP AND HOW LONG SHOULD I KEEP IT?
The Internal Revenue Service and many other tax professionals recommend keeping personal tax returns and all back-up documentations going back 3 years from the most recent filing.
According to H & R Block, keeping tax returns for the 3-year period is tied to the IRS statute of limitations. Under the statute, if you do not file a claim for a refund that you are entitled to, you generally have the later of three years from the date you filed the original return or two years from the date you paid the tax, to file the claim. Likewise, the IRS generally has only three years from the filing date or due date of the return (whichever is later) to assess an additional tax.
Documents to save for 3 years:
• Tax Returns
• Income Statements (W-2s, 1099s, Dividends, or any other income record)
• Expenses (Receipts, Bank or Credit Card Statements, Cancelled Checks, Mileage Logs or any other documentation related to a deduction)
• Property Records
• Investment or Brokerage Statements
• Healthcare Documents
Personal records to save over 3 years:
• Property that will be amortized, depreciated, purchased, or sold: Keep until the statute of limitations expires.
• IRA or other retirement account information: Keep for seven years.
• There can also be other mitigating factors like overpayments or failing to file a return in which case you could be required to have documentation that goes back much further.
Business records that should be kept for a minimum of 4 years:
• Tax Returns
• Employment Records (Including work logs, contact information and payments)
• Gross Receipts
• Bank Statements
• Proofs of Purchase
• Asset Records
You can learn more about the IRS recommendations’ for saving records here.
HOW TO SAFELY DISCARD DATA
There is one plan of action that all the experts agree with:
‘When you decide to get rid of your tax records, shred them’
– Federal Trade Commission
‘If you do decide to get rid of tax documents, make sure to shred them. Tax returns contain sensitive information that identity thieves love.’
– H & R Block
‘When you do dispose of paper financial documents, you should shred them rather than simply dumping them intact in the trash or recycling bin, to reduce the risk of identity theft.’
– NY Times
This tax season, hire a shredding service like Marshall Shredding to ensure your private information, and all your clients’ private information, is destroyed safely and securely. Marshall offers on-site paper and e-waste shredding services. For your peace of mind and convenience, Marshall Shredding provides access to a video-monitoring system to oversee the process in real-time. You can rest easy knowing that the documents and data they dispose of is safe from identity thieves and tax scammers.