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Preparing for Tax Season

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At first, they arrive in your email. Then, they begin to show up in your mailbox. And if you’re not prepared, you may end up having about a dozen scattered around the house.

They are the tax documents you will need to help file your taxes this year. If you’re working, your W2 may arrive first. But it may be closely followed by 1099-INT and 1099-DIV, Form 1040 capital gains and losses, and Form 1098 Mortgage Interest. Schedule K-1 documents may be among the last to arrive.

IRS Guidelines¹

But how long should you keep these records? How long does the Internal Revenue Service expect you to have access to the material?

A good general rule is three years for past tax returns and receipts that support the tax return. There are some exceptions, but three years is a good guideline. Keep in mind this timeline is only a suggestion. Before making any changes to your record-keeping, we encourage you to make certain your tax professional is comfortable with your approach.

“They gave Jesus a coin and he asked, “Whose picture is on the coin? And whose name is written on it?” They answered, “It is Caesar’s picture and Caesar’s name.” Then Jesus said to them, “Give to Caesar what belongs to Caesar, and give to God what belongs to God.” The men were amazed at what Jesus said.” Mark 12:16-17

Did you know?4

In a 2023 study, Pew Research Center found that 53% of U.S. taxpayers said the system’s complexity bothers them a lot. If you’re feeling a bit overwhelmed, let us know. If you’re one of CFC Advisers’ Clients, consider cfd Tax Preparation & Bookkeeping Services, Inc., it’s dedicated to helping its clients manage their tax situation. While we can’t change the tax system’s complexity, we may be able to help simplify yours.

Personal Documents

When it comes to personal documents, the guidelines are a little less clear. But here are some general guidelines for how long to hold onto personal records, such as credit card statements, home improvement records, and diplomas.

To Shred or Not to Shred?

Financial documents contain a treasure trove of information for thieves. Bank account numbers, birth dates, policy numbers are often listed on documents. Shredding is the best way to destroy the information for good.

When it’s time to throw away a financial document, what’s the best strategy or approach? Shredding documents is the “gold standard,” but for some that can be a bit impractical. So if you are having difficulty shredding documents, please contact our offices. We are happy to help because we believe it’s that important.

First Step: Develop a System³

Developing a system for managing and destroying personal information is a good first step. Maybe when you complete your 2024 tax return, you can work with your financial team to determine what other tax records can be destroyed, and how you will repeat the process each year.

Too many financial records lying around the house can create unnecessary clutter and storage issues. Developing a system may help ease some anxiety and make it easier to locate documents quickly, especially in an emergency.

How Long Should You Keep Personal Documents?²

While the IRS provides clear guidance on how long to keep tax records, there’s no official source for how long to keep personal documents. Here are some general rules to consider.

Items
Length of time to hold
Paycheck records, canceled checks and other transactions, credit card statements, bank account information, paid-off loans
1 year
Records of selling a home, medical bills, canceled insurance policies
3 years
Car title, insurance policies, property records, contracts, pension information, home improvement records, warranties
Hold while they are active
Diplomas, Social Security Cards, marriage licenses, birth certificates, immunization records, estate documents, death certificates, military discharge papers
Hold forever

¹ IRS.gov, 2023

² ConsumerReports.org, February 25, 2022

RecordNation.com, 2023

4 PewResearch.org, April 18, 2023

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