Pack Rat No More: Prepare for Tax Season by Learning What to Shred and What to Keep
It is especially important to know what you should and should not shred during tax season
As hard as it is to believe that it's already February, it's even harder to believe that it will soon be spring, which means two things: tax season and spring cleaning.
As you get ready for these, it's a good idea to review which documents you should save, which you can shred, and when you should shred them. See below to find out what you should do when!
You should keep all documents related to major life events: birth, marriage, divorce, and death. The following should be locked away securely:
- Birth certificates or adoption papers
- Social Security cards
- Citizenship papers or passports
- Marriage or divorce decrees
- Death certificates of family members
- If you own any vehicles or homes, keep the auto titles and house deeds stored away safety for as long as you own the property.
The biggest questions in many people's minds, of course, are: what tax records can I shred, and when can I shred them?
- Tax Returns. It's best to be on the safe side with tax returns—keep them forever.
- Pay Stubs. You can shred these after you check them against your W-2.
- Home Improvement Receipts. Keep these until you sell your house. Certain expenses might reduce your capital gains tax.
- Other Tax Records (e.g. cancelled checks, tax-related receipts). Wait seven years before shredding these. Although the IRS usually has three years to audit you, it has up to seven under certain circumstances. It can audit taxpayers any time if they file a fraudulent return.
If you're not sure which tax records you should keep, ask an accountant or call IRS Taxpayer Assistance at (800) 829-1040.
Most experts will tell you that you can shred many other documents sooner than seven years. Shred credit card and utility bills immediately after you pay them. You should also shred sales receipts, unless they're related to warranties, taxes, or insurance. Shred bank statements, pay stubs, and medical bills after one year unless you have an unresolved insurance dispute.
If you're tempted to keep everything "just in case," remember that identity thieves can't find destroyed documents. Destroying documents that contain personal information makes it less likely that your identity will be stolen.