Retain copies of your returns
The IRS offers these tips to better protect your tax records.
l Always retain a copy of your completed federal and state tax returns and their supporting materials. These prior-year returns will help you prepare your next year’s taxes, and receipts will document any credits or deductions you claim, should question arise later.
l If you retain paper records, you should keep them in a secure location, preferably under lock and key, such as a secure desk drawer or a safe.
l If you retain your records electronically on your computer, you should always have an electronic backup in case your hard drive crashes. You should encrypt the files both on your computer and any backup drives you use. You may have to purchase encryption software to ensure the files’ security.
l Dispose of old tax records properly. Never toss paper tax returns and supporting documents into the trash. Your federal and state tax records, as well as any financial or health records, should be shredded before disposal.
l If you are disposing of an old computer or backup hard drive, keep in mind there are sensitive data on these. Deleting stored tax files will not remove them from your computer. You should wipe the drives of any electronic product you trash or sell, including tablets and mobile phones, to ensure you remove all personal data. Again, this may require special disk utility software.
The IRS also recommends retaining copies of your tax returns and supporting documents for three to seven years. Remember to keep records relating to property you own for three to seven years after the year in which you dispose of the property. Three years is a timeframe that allows you to file amended returns or if questions arise on your tax return, and seven years is a timeframe that allows filing a claim for adjustment in a case of bad debt deduction or a loss from worthless securities.