As the looming tax season approaches, many taxpayers scramble to find the answers pertinent to their unique employment, investment and business-related questions from qualified accountants. The question of how long to hold on to tax-related paperwork is one of the most frequently-asked questions that preparers and accountants receive each year. While the specific answers vary greatly depending on the type of paperwork in question, the general rule of thumb is to hold on to every tax-related document for 7 years. This general rule of thumb is especially important if you own a business, or if you have a lot of investments or deductions that would flag the IRS and put you at risk for an audit.
Any documents pertinent to business income tax returns or amendments should be kept for 7 years. If you are filing as a sole-proprietor or an LLC, documents such as accounts payable/receivable ledgers, detailed expense reports and invoices should also be kept for 7 years. If canceled checks are pertinent to tax filing, those should also be kept for the maximum of 7 years along with supporting bank account and credit card statements. If you or an employee has suffered an on-the-job injury, those files should be kept for at least 7 years. If workers compensation was involved, it is very important to keep any files for up to 10 years; you can dispose of them 7 years from when the matter was resolved or finalized.
Employment tax records involving pay, pension, and annuity information should be kept on file for 4 years. Business asset receipts such as vehicle titles should be kept until the property is sold. A licensed tax professional can guide you with answers and advice on unique situations you may encounter in your business or as an employee. Always, make sure to use a cross-cut shredder to dispose of important tax and financial documents once you are ready to throw them away.