Do I Really Have to Keep All of These Tax Documents? Tips for Tax Record Keeping in the Digital Age

Despite Michael Scott’s assertion that paper will be around for forever, it’s becoming less and less meaningful in terms of both day-to-day life and in terms of record keeping. Many individuals and businesses are shifting their record keeping over to a digital platform instead of shoving as many papers as possible into a storage box. Regardless of your record keeping process, both “old school” and “new school” record keepers can learn something from this blog.

You should try to keep every tax document you receive. With regards to income, try to keep all W2s, 1099s, bank statements, official statements detailing retirement benefits, or any other documentation that can be used to show how much income was derived from a source in a given tax year. With regards to expenses, try to keep all receipts, invoices, credit card expenses, and/or any written statements from charitable donations. For safekeeping, you should also try to keep copies of anything regarding property taxes or your investment portfolio, these could come in handy if you decide to sell your home or a portion of your stocks. Most importantly, keep a copy of your tax returns. Not just your 1040, but any schedules that may go along with it (for example, a Schedule K-1 if you are a shareholder in a business).

The question of “how long should I keep these records” warrants an often used answer in both the legal and tax profession, “it depends”. Because the IRS has no statute of limitations for cases of tax fraud, the best idea is to keep your tax documents indefinitely. However, as a general rule of thumb, most tax records can be disposed of after seven years.

If you’re keeping every tax return you’ve ever filed, it’s going to start taking up a lot of space. So as previously stated, a lot of people are shifting over to a form of digital record keeping. The IRS does accept digital copies, but it is recommended to save the digital copies in .pdf format. How you want to store your records digitally is up to you, but there are a few options. First, there are cloud storage servers such as “Dropbox”, “Google Drive”, or “OneDrive”. These servers provide a variable amount of data storage and are free to use, but also offer premium packages. If you’re not a fan of cloud storage, you could also store your tax information on a flash drive, also known as a jump drive or USB drive. Regardless of your storage method, it is recommended that you backup your tax information in another place just to be safe in case you misplace a flash drive or forget a password.