With tax season around the corner, you’re probably knee-deep in documents and paperwork — whether you do your taxes yourself at home, or work with an accountant or tax-preparation company. Either way, securing tax returns and tax-related documents should be at the top of your mind. Tax fraud is one of the most prevalent crimes in the U.S. today. In 2018 alone, 38,976 Americans were victims of tax fraud.
The Internal Revenue Service (IRS) typically has three years after the date you file your tax return — or the date your return is due — to audit a return. So you only need to keep your personal and tax-related information secure for that time period before destroying all relevant documents.
Retention Timelines Can Vary Across Documents
Different tax-related documents need to be stored safely after filing for both legal and security compliance. The IRS can ask you to provide random documents during the tax return audit. Here’s a list of documents that you should retain along with their retention timelines.
Documents That Should Be Retained For At Least 1 Year:
- Month-on-month brokerage statements (checked against yearly statements and 1099s)
- Pay stubs (checked against W-2s)
Documents That Should Be Retained For At Least 3 Years
- 1098 and 1099 forms
- Contribution toward tax-deductible retirement saving accounts (such as IRAs)
- Charitable contribution receipts
- Tax returns
- W-2 forms
Documents That Should Be Retained For At Least 6 Years
- 1099 forms
- W-2 forms
- All business expenses and receipts over the last 6 years
- Annual investment statements
- Proof of miscellaneous incomes — alimony, hobby income, jury duty, gambling, prize money, etc.
What Do Tax Preparation Companies and Accountants Do With Your Data?
If you have someone prepare your taxes, make sure you ask how they handle your tax-related information throughout the process of working with you. This applies to tax preparation companies and accounting firms.
Most tax preparation companies request your tax-related data via three different modes: email, remote access, and/or secure server. They then review your information and feed it into their tax preparation software. After entering the data, the company will audit your information and ensure it is correct and up to date. Once their due diligence is done, they will share the return with you through a transmission method of your choice, and ask you to review, sign and send the return back to them to submit on your behalf. At that time, you should confirm their process for securely storing and/or removing your personal information from their files and/or server.
Documents and Information You Must Destroy After Filing Your Taxes
- Documents that have exceeded the retention timelines (as mentioned above)
- Copies of digital files containing your personal/tax-related information
- Any document comprising your name, address and a contact number that is not required for tax filing
- ATM receipts, credit offers, sales receipts
- Documents that are easily available online such as credit card statements, bank statements, etc.
- Documents related to loans that have been paid off
Protecting Your Identity
When you’re ready to get rid of documents that have crossed their retention timelines, make sure you properly destroy your personal and tax-related information. This means shredding documents, not discarding them in the trash.
A professional shredding company is your best choice. They can shred all of your documents quickly, securely, and at your convenience. Make certain you choose a NAID AAA Certified shredding company, which means the shredding provider has written policies and procedures and quality control in place.Back to Blog