# Keeping tax paperwork



## berniej (Mar 5, 2012)

how long is it advisable to keep your old tax paperwork?

Thanks in advance.

Bernie McKenna


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## Bevdeforges (Nov 16, 2007)

The official word I have from a tax preparer friend of mine is that you keep copies of all your returns, and all your backup for 4 years past the filing date. She actually advises to shred both the returns and the back up after that (due to the statute of limitations). Must admit I've never done that, but it's what she advises her clients.
Cheers,
Bev


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## berniej (Mar 5, 2012)

Thanks,now I can clean my storage box.

Bernie


Bevdeforges said:


> The official word I have from a tax preparer friend of mine is that you keep copies of all your returns, and all your backup for 4 years past the filing date. She actually advises to shred both the returns and the back up after that (due to the statute of limitations). Must admit I've never done that, but it's what she advises her clients.
> Cheers,
> Bev


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## StewartPatton (Aug 5, 2014)

Well, there's no rule here, just rules of thumbs. Note that the general 3-year statute of limitations is extended to 6 years in some cases, so there's a decent case to keep stuff for 6 or 7 years past the return filing date. Then, after that, honestly there's no principled way to pick any date on which it is completely 100% safe to throw away old tax records. There could be reasons to have info going way way back (e.g., information that establishes your basis in property). 

Most of my clients effectively store information and records indefinitely because it's already in an electronic medium, which has very low storage costs and lasts essentially forever. If you have a box of all sorts of stuff laying around, then you could scan the contents if you wanted to make the actual storage easier.


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## BBCWatcher (Dec 28, 2012)

Since this is an internationally oriented forum we should also point out that governments outside the United States might have their own requirements. For example, if you take a foreign tax credit in -- pick a random country -- then those tax authorities might require you to maintain records for a different period of time to justify/defend that foreign tax credit.

I agree with Stewart. Over the past couple years I've scanned lots of paper records and maintained both on-site and off-site backups. I've been able to cap the amount of physical paper to a very small amount. At 300 dpi (or even 200 dpi) and one bit per pixel -- settings that work for most records -- the amount of data storage space consumed is trivial. Even with higher settings for the occasional "difficult" record there's no particular constraint. Many records now never even see paper at any point, especially if you sign up for e-statements when available. I archive e-statements as well. The bulk of the paper I consume or see for a tax filing is probably the tax filing itself, and that paper copy gets mailed off to the IRS and doesn't take up any physical space on my end. (In 2014 it was about 35 sheets of paper, nearly all two-sided.)

I also agree with Stewart about cost basis calculations as one example where having "old" records available is at least highly useful. Think of pre-1984 AT&T stock, for example, and all its spinoffs, splits, etc. The cost basis calculation can be very complicated, and it's very helpful to know what you did in prior tax years, especially if you sold one of the spin-offs. FIFO sort of issues are also "interesting" if you have sold partial holdings.

Opinions vary, but I know some attorneys who have now flipped their views on this, that -- assuming you're not _trying_ to break some law -- old records might be at least as likely to exonerate you as not, or at least show that you're cooperative, which counts for a lot. A lot of companies have changed their record retention policies as a consequence, and it doesn't hurt that digital data storage costs have fallen a lot. There's also the fact that digital records are sometimes recoverable even if you think you've deleted them, and most records have counterparties. If I delete a credit card statement from 2006, it doesn't mean that the credit card company has. I notice that Paypal, for example, apparently keeps every transaction record since Paypal's founding. So the only person you're inconveniencing if you erase Paypal statements is you.

Another issue that comes to mind is social insurance earnings histories. U.S. Social Security eligibility and benefit levels are determined based on contribution histories. If they got something wrong in their records, then that's a problem. How do you prove they got something wrong? You go back to old tax and financial records. If you don't have them when the time comes, that's a problem. I have seen an incorrect figure in my Social Security earnings history -- a figure that's too low and that would reduce my future retirement benefits. SSA still might correct it (it's recent), and I'm watching it, but if they don't I'll be in touch. If I hadn't noticed that I'd be arguing with SSA decades from now, presumably.


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## jbr439 (Nov 17, 2013)

BBCWatcher said:


> ...
> Over the past couple years I've scanned lots of paper records and maintained both on-site and off-site backups.
> ...


Can you say what you do for off-site backups? Do you use something like Google Drive or is it something more professional? Do you encrypt before off-siting? 

I've got a number of soft-copy records and documents replicated at home on multiple storage units. However, that wouldn't help too much in the event of, say, a fire, so I'm trying to figure out the best way for me to off-site this sensitive data.

TIA


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## BBCWatcher (Dec 28, 2012)

jbr439 said:


> Can you say what you do for off-site backups?


Another building some reasonable distance away.



> Do you encrypt before off-siting?


Yes, plus there's reasonable physical security. Though keep in mind if the keys are only in your head that's a single point of failure.


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