What Are Tax Returns?
Tax returns are documents filed with the Internal Revenue Service (IRS) that report an individual's or business's income, taxes, and other financial information. The most common types of tax returns are individual income tax returns (Form 1040) and corporate tax returns (Form 1120). Tax returns are used to determine how much a person or business owes in taxes, or whether they are due a refund. The amount of taxes owed is determined by applying the relevant tax laws to the information reported on the tax returns.
Why Should You Keep Tax Returns?
Tax returns are important legal documents that contain valuable information about your financial situation. By maintaining your tax returns, you'll have a record of all of your income, deductions, and other financial activity for the year. This information can be used to verify your income when applying for a loan, to support an audit by the IRS, or to calculate taxes owed when filing future tax returns. Additionally, keeping your tax returns allows you to compare the information from your previous years’ returns, which can be helpful in understanding your financial trends.
How Long Should You Keep Tax Returns?
It's important to keep tax returns for a certain period of time, as recommended by the IRS. The length of time you should keep your tax returns will depend on the type of tax return and your financial situation. Generally, the IRS recommends keeping tax returns for three years after the date you filed the return, or two years after the date you paid the taxes, whichever is later. However, there are some situations where you should keep your tax returns for longer than three years. For example, if you are self-employed and file a Schedule C, you should keep your returns for at least six years. Additionally, if you owe taxes or you anticipate a future dispute with the IRS, you should keep your returns indefinitely.
What Should You Do With Tax Returns?
Once you have determined how long to keep your tax returns, it's important to decide how you will store them. You should always keep a copy of your tax returns in a secure location, such as a fireproof safe or a secure online storage system. Additionally, you may want to consider keeping your returns electronically, as this will make them easier to access and less likely to be lost or damaged. You can also keep copies of your tax returns in a secure location, such as a bank safe deposit box, for additional security.
When Should You Shred Tax Returns?
Once you are sure you no longer need your tax returns, you should consider shredding them. Shredding your tax returns will protect your personal information from being accessed by someone else and will help to prevent identity theft. It's important to remember to shred all copies of your tax returns, including the copies you may have made for your records. You should also make sure to shred any other documents that contain personal information, such as bank statements or credit card statements.
What Other Documents Should You Keep?
In addition to keeping your tax returns, there are a number of other documents that you should keep in your records. These documents include receipts, bank statements, credit card statements, and any other documents that may be relevant to your financial situation. It's important to keep these documents for at least three years, as the IRS may request them during an audit. Additionally, keeping these documents for longer periods of time can help you to track your financial trends and make informed decisions about your finances.
Conclusion
Tax returns are important documents that contain valuable information about your financial situation. It's important to keep your tax returns for a certain period of time, as recommended by the IRS. Additionally, it's important to store your tax returns securely and to shred them when you no longer need them. Furthermore, there are a number of other documents that you should keep in your records, such as receipts, bank statements, and credit card statements. Keeping your tax returns and other documents can help you to stay organized and to make informed decisions about your finances.
