Tax Season! But Wait, What Records Should I Keep?
Tax season is more than just filling out your return—it’s about having the right paperwork to back it up. Whether you’re an employee, freelancer, or small business owner, knowing what tax records to keep, why they matter, and how long to keep them can save you time, money, and stress if the IRS ever comes knocking.
Below, we break it down document by document, so you can feel confident that you’re holding on to what matters—and discarding what doesn’t.
W-2 Forms
- Which: W-2 form from your employer(s)
- Why: This form reports your wages and tax withholdings to both you and the IRS. It’s the foundation of your return if you’re an employee.
- How Long to Keep: At least 3 years after you file your tax return. Keep longer if you’ll need proof of income for loans or Social Security benefits.
1099 Forms
- Which: Any 1099 form you receive—this includes 1099-NEC (freelance income), 1099-MISC (other earnings), 1099-INT (interest), 1099-DIV (dividends), and 1099-K (payment platforms like PayPal).
- Why: These forms report non-employee income to the IRS. If you don’t report it, the IRS might flag your return.
- How Long to Keep: 3–6 years, especially if you’re self-employed or own a business.
Paystubs
- Which: All paystubs received throughout the year
- Why: Use them to double-check your W-2 for accuracy and track income or withholdings throughout the year.
- How Long to Keep: Hold onto them until you verify your W-2 is correct. Keep longer if using them for proof of income on applications.
Bank and Credit Card Statements
- Which: Statements showing deductible purchases or income deposits
- Why: These serve as backup for expenses you’re deducting, such as charitable donations or business costs.
- How Long to Keep: 3–6 years, depending on whether the expenses relate to personal deductions or business income.
Receipts for Deductible Expenses
- Which: Business-related purchases, charitable contributions, medical expenses, and other tax-deductible items
- Why: You need documentation to support every deduction you claim—especially if you’re itemizing.
- How Long to Keep: 3–7 years, depending on the type of deduction and your filing situation.
Investment Records
- Which: Year-end summaries, trade confirmations, and capital gain/loss reports
- Why: These are needed to report gains or losses on investments and calculate your tax basis.
- How Long to Keep: 7 years after you sell the asset, especially if losses are claimed or carried forward.
Mortgage Interest Statement
- Which: Annual Form 1098 from your mortgage lender
- Why: Shows how much mortgage interest you paid—a key deduction for many homeowners.
- How Long to Keep: 3 years after filing, but keep longer if it affects your home’s cost basis.
Education-Related Forms
- Which: Form 1098-E (student loan interest) and 1098-T (tuition payments)
- Why: These documents support claims for education-related credits and deductions, such as the American Opportunity Credit or Lifetime Learning Credit.
- How Long to Keep: 3 years from the date you file the tax return claiming the education credit.
Bonus: Keep Copies of Your Actual Tax Returns
- Which: The full return you filed (including schedules and attachments)
- Why: This is your ultimate proof of what you reported. It’s also a helpful reference for future filings or loan applications.
- How Long to Keep: Indefinitely. The IRS recommends keeping your tax returns forever.
Stay Organized and Stress-Free During Tax Season
Holding onto the right tax documents can mean the difference between a smooth refund and a stressful audit. By understanding what to keep, why it matters, and how long to store each record, you’re taking a big step toward hassle-free tax seasons year after year.
To stay on top of your recordkeeping:
- Digitize everything. Scan paper copies and store them securely online or in encrypted folders.
- Organize by year and type. Group documents into categories like Income, Deductions, Investments, etc. for quick access.
- Automate when possible. Use personal finance software or mobile apps that track expenses, store receipts, and even generate reminders. FormPros can help in that regard.
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