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Time to clean out the files

You are wondering how much of the stuff in your file drawers you can clean out, throw away or shred.  Year-end is a good time to clear out the old to get ready for the new.  Spend some time setting up your system for keeping valuable tax and financial records.

Generally, the IRS recommends keeping copies of tax returns and supporting documents at least three years. Some documents should be kept up to seven years in case questions arise. Keep records relating to real estate up to seven years after disposing of the property.  You need both the purchase documents and the sales documents.

Here are some tips:

  • Keep a copy of your last three tax returns. Beginning in 2017, you may need information on your prior year return to e-file.
  • Keep tax records safe and secure in a digital PDF format which is encrypted and stored securely.
  • Health care information statements (1095-A, B and C) should be kept with other tax records. Taxpayers should keep these – as they do other tax records – generally for three years after they file their tax returns.

Taxpayers who need tax information can request a free transcript for the past three tax years. The ‘Get Transcript’ tool on IRS.gov is the fastest way to get a transcript.

Be very careful where you store and how you secure your information. Keep tax, financial and health records safe and secure whether stored on paper or kept electronically. When records are no longer needed for tax purposes, ensure the data is properly destroyed to prevent the information from being used by identity thieves.