BOSTON (CBS) – Most of us keep too much of the paper that comes into our homes. A warranty for a clock radio that is 10 years old is really just a keepsake and can be tossed. And then there are those of us who throw too much away.
A word of advice: When tossing old documents, if they have pertinent information like your name, credit card number, or Social Security number on them, use a shredder or a pair scissors on them before you toss them out.
Let’s talk about what the IRS expects us to keep in our files. According to the IRS, you will want to keep records that support your income and deductions on your tax return. They should be kept until the period of limitations runs out.
What that means is they can audit your return or assess you an additional tax. Or it can work in your favor also, you can also amend your return to claim a credit or a refund.
This is 3 years from when you filed your return. So you need to keep the 2012 tax information at least thru 2016 or longer.
You will want to keep your records for at least 7 years if you filed a claim for a loss from worthless securities or bad debt deduction.
If you filed a fraudulent return, basically if you thought you could pull a fast one on the IRS such as not reporting income or decided not to file a return for some reason, you will want to keep your tax information indefinitely. There is no limitation on when they can come after you and often times they are very good at catching you. Computers and banks leave a paper trail.
We all are responsible for paying our taxes. My advice, report all of the income and take every deduction you are entitled to. You will sleep better at night.
One more thing: Think about Willie Nelson still working in his 70s to supposedly pay his back taxes. He claimed his accountants did not pay his taxes, but he signed the return making him responsible. He was originally assessed at $30 million 20 years ago and it was negotiated down to $6 million.
You can hear Dee Lee’s expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m., 3:55 p.m., and 7:55 p.m.
Subscribe to Dee’s Money Matters newsletter here.