How to dispose of old tax returns and financial statements

debodun

debodun

SF VIP
Location
way upstate in New York, USA
I found boxes and bags of my income tax statements and yearly financial info dating back to the mid 1990s in the attic. What should I do with them and how far back should I keep the records?
 

Find out your state and federal years required to maintain them and then haul the rest to a shop that does professional shredding. It’s worth the cost and then you don’t have to worry about disposing of the shredded paper.
 

From the IRS:

Period of Limitations that apply to income tax returns​

  1. Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.
  2. Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return
  3. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
  4. Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
  5. Keep records indefinitely if you do not file a return.
  6. Keep records indefinitely if you file a fraudulent return
  7. Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.
However, I doubt if she will spend the money to have them shredded
 
Since we don't willingly commit fraud or errors, I generally keep 10 years worth of everything - just in case. (I read somewhere that the IRS can go back to 10 years, if they suspect fraud.) DH has always lived in fear of being audited and that has happened twice but always within a year of filing. One was the preparer's mistake (and we had to pay another CPA to re-do the whole return since the first one "doesn't do taxes anymore" - sheesh) One turned out not to be an issue since the IRS knew the preparer and never looked beyond his phone call to them. So, is up to you. If they haven't come looking for you by now....... Retain a few years and keep doing what you're doing.
 
Check with your bank. Our banks around here have a "free" shred day. You take all your stuff up to them & there is a huge truck/shredder sitting in their parking lot that will shred all your stuff for free. If you miss one, the other banks have one on a different month or week.

This is if you have lots of documents to shred. I love them as I burnt up two over $100.00 shredders trying to shred my Wife's medical info from cancer 6 years ago. I even followed the directions to shred for 10 minutes then let it rest 1/2 hr. The grinding teeth of the cross-cut I guess got worn out.

Any more I don't keep many documents as my tax preparer has them stored on her backup SSD (Solid State Drive) hooked to her computer.
 
Alligatorob said:
Maybe I am naive, but I have always thrown mine away like any other garbage. Never had a problem. I do wrap the so they are not so obvious.
Click to expand...
I just toss mine, too, but I don't wrap them or bag them; I want them to get too yukky to read by letting it mix in with the yukky garbage. I do rip them up, tho. My son photographs his and downloads them to a data stick that's about an inch-and-a-half long. Then he shreds them.

Now that our files are digitized, I see no reason to keep any of them. You can just find what you need on the IRS website and print it out for your tax preparer. Or I suppose you could just send the file instead.
 
debodun said:
I found boxes and bags of my income tax statements and yearly financial info dating back to the mid 1990s in the attic. What should I do with them and how far back should I keep the records?
Click to expand...


I am a former IRS agent and teacher of tax accounting. Under the Tax Code you are required to keep tax records for three years because that is the normal statute of limitations when claiming a refund. However, if the government wants to proceed with a criminal case against anyone they can go back six years. Thus, if you say a government assessment is wrong, you will need records going back to that time to protect yourself in tax court or in district court.

But there are other issues: on several occasions I found that people coincidentally had the same name, same Social Security number, and were roughly the same age. All heck broke out when people tried to claim government benefits that were due to them. The only way to prove that the income and tax payments were actually yours was for a person to present copies of his/her tax returns. That settled the issue.

Another consideration: a property was abandoned for a few years, say for example, a retirement cabin in the woods. Another party lived in that property and claimed property rights under an old Anglo Saxon common law concept called "adverse" possession. The original owner now wants to reclaim the property. The squatter says no one else resided there. The original owner now presents tax returns going back ten years showing that he paid property taxes on the cabin and had intended to go back all along. He might say that work commitments kept him away but is now retired and wants to spend more time there. Or he might say he intendeds to sell the house and wants to pocket the money from the sales. With such info the court in such a case will likely rule for him rather than the squatter.

Another consideration: weathers disasters which can cause a house, a boat, a car, and all property to be either swept away by wind, fire, and/or waters. I distinctly remember such a case where the only thing a taxpayer recovered was a strong box showing photos of his house and expensive jewelry. Sadly, he had no insurance and never recovered all the property he lost. He claimed a tax deduction under the old tax Code (it has since changed) on his 1040 Schedule A. In those days we had to consult experts on property assessments and after a few weeks I got back a report from our assistant. I told the taxpayer that he could have a major deduction and he was able to recover some money. I well remember that the guy was so thankful that we were able to help him to get at least some measure of recovery from the terrible disaster he endured.

There are other considerations which may make it worthwhile to save your records.
 
oldiebutgoody said:
Another consideration: weathers disasters which can cause a house, a boat, a car, and all property to be either swept away by wind, fire, and/or waters. I distinctly remember such a case where the only thing a taxpayer recovered was a strong box showing photos of his house and expensive jewelry. Sadly, he had no insurance and never recovered all the property he lost. He claimed a tax deduction under the old tax Code (it has since changed) on his 1040 Schedule A. In those days we had to consult experts on property assessments and after a few weeks I got back a report from our assistant. I told the taxpayer that he could have a major deduction and he was able to recover some money. I well remember that the guy was so thankful that we were able to help him to get at least some measure of recovery from the terrible disaster he endured.
Click to expand...
In 2005 our house was flooded by a hurricane storm surge. All of our tax records and lots of other stuff was lost. The IRS gave us a lot of leeway. I just did the estimates myself and they accepted them, and we got a really good deduction out of it. We were in a declared disaster area, and there were lots of hurricanes that year, if that makes a difference. Never missed those lost records...

We did have flood insurance, but there is a lot it doesn't cover, less than half our damages. An interesting aside, the flood insurance is through FEMA, a federal program. I lost a couple of boxes of Cuban cigars, I claimed those and the insurance paid. So the federal government paid me for the illegal Cuban cigars.
 
^ Forty years ago when I conducted that audit, flood insurance was virtually unknown. That is why the poor guy suffered such a financial loss. Thankfully, it is now widely available though, I understand, it is costly.

I recall another case where a well to do taxpayer bought a home many years before but was now deceased. For some reason, there was a dispute as to valuation of the property. Thankfully, his records were found in the attic and they were used to match records from the county which showed value at the time of purchase, capital improvements which increased the value, and which could be used to properly assess its present value. The property was sold and each of his adult children got a share. Those tax records going back all those years were a big help in determining value and proper distribution.

Bottom line is, it may be best to keep those records if you plan on leaving an estate as it determines actual ownership, valuation, and succession rights & proceeds for your heirs from any estate sale.
 
Aneeda72 said:
I thought it was 7, 😂, I shredded all but 7 years back
Click to expand...



Officially, this is the proper answer:


Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.Aug 5, 2021
https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records

How long should I keep records? | Internal Revenue Service​





However, consult with your tax accountant for the reasons I discussed on my posts.
 
I shred mine and keep 5 years back only. Mine are pretty simple and my tax lady has copies anyway. If you throw them away you are being very foolish in my opinion as my tax lady says you would be surprised what someone can find out about you with just a small bit of info. At least shred them. My shredder bin fits easily into a 13 gallon trash bag. Very easy!
 
If you cant shred then sit down and tear off everywhere your social security number shows and all account numbers. It takes time but you will be safe to throw them in the trash. As for the paper with the numbers on them I put them in a steel bucket then burn them.
 
Alligatorob said:
Maybe I am naive, but I have always thrown mine away like any other garbage. Never had a problem. I do wrap the so they are not so obvious.
Click to expand...
Wait...you threw away papers with your social security number and other personal information (eg: if you have investments, bank accounts) on them?! Luckily you never had problems because you are an identity theft victim waiting to happen! Just so ya know....when my oldest grandson was in his 20's my DIL found out that he was the victim of identity theft when he was very young. Don't ask me to explain how it happened because I don't remember. I just remember her being very upset about it.

@debodun Yes, invest in a good cross cut shredder. I used to take mine to the shredder man's truck when he was in town. Confetti in 3 seconds. But that was because I was lazy and didn't keep up with my shredding at home. Now I'm doing better with that.
 


Back
Top