Hopefully, you haven’t misplaced or thrown away your 2017 W-2s or 1099s yet. While you may have made it through another tax season, you’ll need to file those docs away somewhere safe for the next few years.
You should hang on to your tax returns indefinitely (an electronic copy of everything is fine). That’s not necessarily for the IRS’s benefit, but because some creditors and other types of financial institutions may require this documentation well after the IRS has stopped caring about it.
The length to keep supporting documents, however, varies. The IRS recommends three years (with some exceptions) from the day you filed because it typically has to initiate an audit in that time, while some tax experts say seven years is a better amount of time.
These are the documents you’ll want to hold on to for at least three years:
- 1099s reporting income
- 1099s reporting capital gains, dividends or interest
- Form 1098 (for the mortgage interest deduction)
- Charity receipts
- Any other documents that tracked itemized deductions (alimony, mileage logs, expenses, etc.)
Again, how you file all of this information is totally up you. Electronically is probably most convenient for people, and the IRS doesn’t stipulate how it needs to be stored.
Other types of paperwork you’ll want to keep indefinitely include Form 8606, which proves you already paid taxes on nondeductible IRA contributions; Form 5498, for IRA contributions; and any documents related to the amortization, purchase or sale of a house (or other type of property), like insurance forms closing statements, and property tax assessments. If you write off a stock loss, keep those docs for at least seven years.
Finally, according to NerdWallet, if you under-report your income by more than 25 percent, the IRS then has six years to audit you. And if you do not file or you file a fraudulently return, the IRS advises you to keep your returns indefinitely. There’s no statute of limitations on auditing if you break the law. You know, because you’re probably very concerned about a seamless, stress-free audit in these cases.