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Quill

Shredding old income tax returns

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Do you find it weirdly psychologically difficult? ‘Cause I am. I’m doing Bootcamp cleanout of home filing cabinet (so aggravated because there’s nowhere to put the relevant stuff because the file drawers were full). I have tax returns from 2001 on and also a big file of relevant papers for each year, like investment statements. I know a bunch of these can go. But they look so...official. Our accountant puts each one in a dark green folder, neatly stapled. It’s hard to just shred those things! They are crying out, “I’m official! I’m a Very Important Paper!” 

Someone order me to shred these things. 

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12 minutes ago, Ravin said:

You could scan them first.

That...is a good idea! 

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40 minutes ago, Quill said:

Do you find it weirdly psychologically difficult? ‘Cause I am. I’m doing Bootcamp cleanout of home filing cabinet (so aggravated because there’s nowhere to put the relevant stuff because the file drawers were full). I have tax returns from 2001 on and also a big file of relevant papers for each year, like investment statements. I know a bunch of these can go. But they look so...official. Our accountant puts each one in a dark green folder, neatly stapled. It’s hard to just shred those things! They are crying out, “I’m official! I’m a Very Important Paper!” 

Someone order me to shred these things. 

Arrgh! My reply was eaten before I could hit submit. 

We are supposed to keep the actual returns (just the forms & schedules) for forever and ever. I'm sure a scanned copy would suffice (keep them in several places due to external hard drives dying, lost thumb drives, etc)  My eventual plan is to scan, save to the computer, a thumb drive, a back up hard drive, AND burn to a disc.... I'll probably keep duplicates of each method, too.  The supporting papers like property taxes paid, INT-1099s, charitable contribution proof, etc, can get tossed after the audit date has passed (which is three years AFTER the filing date, so if you extend and file in Oct, it's three years after that date). If they think you've underreported your income by 25%, they can go back seven years, so I keep my papers for seven years.

You want to keep the W2s to be sure they match up with what the SS office has on file for you. Once you start collecting SS, you can shred those. Again, scanned should suffice.

As for brokerage stuff, keep only the year-end statements if they show yearly totals. This comes in handy for cost-basis when selling. Scans of these would be fine, too.

The forms we get when contributing to an IRA should also be kept forever. This also shows cost basis. Once the IRA is depleted, keep them for three years, or whatever the audit period is at that time in case the IRS questions deductible/non-deductible. Again, scanned should be fine. 

All of that said..... I am terrified to shred my papers. I've had an external hard drive die for no reason, burned DVDS won't play on all machines, and thumbdrives are very easy to lose/write over. Paper is paper. Knowing me, I'm liable to scan and save across multiple platforms AND keep the returns (and the schedules, forms).

Oh, if your CPA is like the one we had for a few years, grab the staple remover and dissect the packages he/she gave you. I got rid of a lot of bulk doing that.

My biggest chore is scanning 25 years of photos......  I'll worry about my papers once that is done. That's a heck of a lot of scanning I have to do. 😨

And to answer your question, yes, I find I have a psychological problem with getting rid of official papers!

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Oh, heck no.  If for some bizarre reason you needed a spare copy, the IRS has them for you.  I find it wonderfully freeing to finally be out of the loopback period and (briefly) regain that space in the filing cabinet before all of the documents for the current tax year start piling in. 

The fancy dark green folder is to make you feel better about the big checks you write to the accounting firm for their services.  It's a lovely piece of psychological marketing, but that's all it is.

 

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Not for me!  My only reason for having a million years to shred a few months back was because I’m lazy, lol.  This year’s are still on my desk waiting for me to shred a year to make room!

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An aside, I'm spending the rest of the week at a national estate planning conference.  The amount of freebies and marketing that I'm receiving is overwhelming.  One booth is bringing in specialty baristas and has a charging station for phones. Another is offering free headshots for my use in promoting my own services. And so on.  When you peel back the curtain and look at the marketing end of things at how all of these businesses are trying to project wealth, position, and expertise (thick paper, gold embellished lettering, etc.), it gives me a healthy disdain for all of the frippery.

Edited by prairiewindmomma
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I never have shred mine.  I probably would just throw them out if I ever get around to decluttering that part of my closet.

I agree with the idea to scan them first.  That would definitely make the parting easier.

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After our most recent move, all I could find are last year's.  I have no idea where the previous years returns went.  

I have been filing tax returns for 25 years, as a married woman for 17 of those 25.  And there are only 2 reasons I have ever referenced them.  The first is to locate my younger kids social security numbers lol.  (I do have the card for one of them, but should probably order a card for the 2 youngest.)  The second reason I ever referenced back was the year we filed on the short sale of our house.  The IRS claimed that we had made a mistake on by not claiming the cancelled debt as income, and I had to go back to show both that we were insolvent AND that the cancelled debt was on our primary residence.  They didn't send the "mistake" letter until like a year later, so I had to go back to figure out where they had screwed up so I could show them how the mistake was theirs and not mine.

But beyond that.....I haven't ever needed them.  So for me, I am not really all that concerned about keeping them.  

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18 minutes ago, happysmileylady said:

After our most recent move, all I could find are last year's.  I have no idea where the previous years returns went.  

I have been filing tax returns for 25 years, as a married woman for 17 of those 25.  And there are only 2 reasons I have ever referenced them.  The first is to locate my younger kids social security numbers lol.  (I do have the card for one of them, but should probably order a card for the 2 youngest.)  The second reason I ever referenced back was the year we filed on the short sale of our house.  The IRS claimed that we had made a mistake on by not claiming the cancelled debt as income, and I had to go back to show both that we were insolvent AND that the cancelled debt was on our primary residence.  They didn't send the "mistake" letter until like a year later, so I had to go back to figure out where they had screwed up so I could show them how the mistake was theirs and not mine.

But beyond that.....I haven't ever needed them.  So for me, I am not really all that concerned about keeping them.  

Yeah...well I have needed mine numerous times over the years, usually for opening or refinancing a HELOC, which we have used to buy lots or rental properties. And I needed them to fill out FAFSAs. But of course, in any case, I only need three years back at most. It doesn’t seem likely I will ever need to scrounge up my 2001 returns. 

After I posted this, I found another file box that have returns from 1996-2000. So I apparently do have almost all returns for as long as we’ve been married. It is hard to see why I would ever need those, though. 

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9 minutes ago, Quill said:

Yeah...well I have needed mine numerous times over the years, usually for opening or refinancing a HELOC, which we have used to buy lots or rental properties. And I needed them to fill out FAFSAs. But of course, in any case, I only need three years back at most. It doesn’t seem likely I will ever need to scrounge up my 2001 returns. 

After I posted this, I found another file box that have returns from 1996-2000. So I apparently do have almost all returns for as long as we’ve been married. It is hard to see why I would ever need those, though. 

To fill out FAFSAs?  Neither DH nor DD23 needed more than the current year's taxes to fill out the FAFSA?  Is there a particular requirement that needs more than that when you are above or below a certain income level?  We have always been really middle class during the years DH and then DD were in college (between the two of them 2003 to 2018 with only about a year or two between) so maybe there are special requirements above or below that I am not aware of.

 

I will say, I don't have a clue how far back we needed to go when we bought our house.  We closed in 2003, but we had gotten married in 2002, so we had like a single return as married filing jointly and at the jobs/positions we were in when we bought the house.  But when we did our HELOC, I don't recall that they asked for returns at all.  I suppose each bank and lender is probably in their own little world in terms of what they will require.  

Edited by happysmileylady

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I keep them for 7 years, which is how long the IRS can go back for major under-reporting. Now, they can go back for eternity for fraud, but since I'm not perpetrating fraud, I shred after 7 years. 

In fact, in my files rather than Taxes 1996, my files are Last year's taxes, 2 year old taxes, etc, and I move them every year and shred the one that was in the 7 year old tax folder. 

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1 hour ago, happysmileylady said:

To fill out FAFSAs?  Neither DH nor DD23 needed more than the current year's taxes to fill out the FAFSA?  Is there a particular requirement that needs more than that when you are above or below a certain income level?  We have always been really middle class during the years DH and then DD were in college (between the two of them 2003 to 2018 with only about a year or two between) so maybe there are special requirements above or below that I am not aware of.

 

I will say, I don't have a clue how far back we needed to go when we bought our house.  We closed in 2003, but we had gotten married in 2002, so we had like a single return as married filing jointly and at the jobs/positions we were in when we bought the house.  But when we did our HELOC, I don't recall that they asked for returns at all.  I suppose each bank and lender is probably in their own little world in terms of what they will require.  

Well, the FAFSA dates have changed in the past couple of years. I don’t remember exactly how this went, but for example, for the FAFSA that was due by March -something 31st? - this year, I needed 2017 taxes because 2018 were not filed yet. It’s been messing me up for a couple of years, actually, because we made (a lot) more money in 2017 than 2018, so it annoys me that they are calculating EFC on a fantasy income from the past. 

We also had to refinance our HELOC this past January (forced refinance) and we had to provide 2016 and 2017. I also remember some stock shares thing we did several years ago for which we had two produce three years worth. 🤷🏻‍♀️

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I have the same problem. The law in Canada used to be keep the previous seven years' tax records, and now I believe it's keep the previous six years. This year I noticed I have the previous eight years and did not do anything about it. 😳 I do usually pull apart the tax return as it is getting destroyed and keep anything I think is important which is vastly less than what is there. It is always hard.

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I recently needed to prove that I have been  continuously residing in this country since 2002, so that my children could receive a certificate of citizenship. 17 years of tax returns, property tax receipts, and W2s finally convinced ICE. I am not throwing anything out.

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18 hours ago, prairiewindmomma said:

Oh, heck no.  If for some bizarre reason you needed a spare copy, the IRS has them for you.  I find it wonderfully freeing to finally be out of the loopback period and (briefly) regain that space in the filing cabinet before all of the documents for the current tax year start piling in.

Actually, the IRS losing things (data corruption, mislabeling, whatever) is the main reason why we, the taxpayers, are supposed to keep our returns as proof we filed. It is ultra rare, to be sure, but if they come back and say that they don't have a return for you from 25 years ago and now you have $xx,xxx in fines, that would be awful.  Like I said, ultra rare, but I find it easier to just keep the darn things rather than rely on the gov to keep my info.

16 hours ago, Quill said:

Yeah...well I have needed mine numerous times over the years, usually for opening or refinancing a HELOC, which we have used to buy lots or rental properties. And I needed them to fill out FAFSAs. But of course, in any case, I only need three years back at most. It doesn’t seem likely I will ever need to scrounge up my 2001 returns. 

After I posted this, I found another file box that have returns from 1996-2000. So I apparently do have almost all returns for as long as we’ve been married. It is hard to see why I would ever need those, though. 

In your case, I would definitely just keep the darn pile. I have my really old ones in a safe deposit box. We need one anyway, so for the extra $5 a year, I got the big one and am in no danger of filling it up soon. Some people just stuff them in a cardboard box in an attic (I'd still scan them if they weren't e-filed and are already digitized).

12 hours ago, regentrude said:

I recently needed to prove that I have been  continuously residing in this country since 2002, so that my children could receive a certificate of citizenship. 17 years of tax returns, property tax receipts, and W2s finally convinced ICE. I am not throwing anything out.

Yes, immigration has its own wonderful list issues. Having to prove/re-create a life is no joke. I'd rather keep reams and reams of papers and be able to 'lay hands' on things almost immediately and not rely on scans/computer software/hardware. Also, some agencies require originals and not copies. I am drowning in papers because of this, but I sleep well knowing I have everything "they" could possibly want.

Edited by Wildcat
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18 hours ago, Wildcat said:

You want to keep the W2s to be sure they match up with what the SS office has on file for you. Once you start collecting SS, you can shred those. Again, scanned should suffice.

The forms we get when contributing to an IRA should also be kept forever. This also shows cost basis. Once the IRA is depleted, keep them for three years, or whatever the audit period is at that time in case the IRS questions deductible/non-deductible. Again, scanned should be fine. 

 

 

Regarding W2's and SSA, I used to work with a guy that was retiring from the USPS.  He had problems with this and had to provide proof from the beginning of time almost.  I am also keeping the year end statement from our paychecks.

Regarding the IRA contributions, I am currently going through 5 boxes of old papers of my mom's and dad's (dad is still alive, but my mom is not).  Everything I've read says to keep all your paperwork for IRA contributions for cost basis.  I think it will also help for those who inherit if there is any left.  

I would also keep all old papers relating to improvements to your house.  My dad didn't spend much for his house 50+ years ago and he is going to do very well selling it (hopefully this month).  I am going through those boxes to find everything I can to increase his basis for tax purposes.

I am also keeping all of my parents tax returns (for now) and I have ours too.  I will scan them, but am keeping the paper copies.  

I have digital bank records, but am printing and keeping each year end statement for bank and brokerage accounts.

I used to be an accountant so I am definitely in the group that wants to keep paper evidence.

Wildcat, once I get through all my dad's stuff, my next "chore" is all the old photographs.  Scanning them, splitting them up between me and my sister.  Lots of boxes of them...

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2 minutes ago, mlktwins said:

 

Regarding W2's and SSA, I used to work with a guy that was retiring from the USPS.  He had problems with this and had to provide proof from the beginning of time almost.  I am also keeping the year end statement from our paychecks.

Regarding the IRA contributions, I am currently going through 5 boxes of old papers of my mom's and dad's (dad is still alive, but my mom is not).  Everything I've read says to keep all your paperwork for IRA contributions for cost basis.  I think it will also help for those who inherit if there is any left.  

I would also keep all old papers relating to improvements to your house.  My dad didn't spend much for his house 50+ years ago and he is going to do very well selling it (hopefully this month).  I am going through those boxes to find everything I can to increase his basis for tax purposes.

I am also keeping all of my parents tax returns (for now) and I have ours too.  I will scan them, but am keeping the paper copies.  

I have digital bank records, but am printing and keeping each year end statement for bank and brokerage accounts.

I used to be an accountant so I am definitely in the group that wants to keep paper evidence.

Wildcat, once I get through all my dad's stuff, my next "chore" is all the old photographs.  Scanning them, splitting them up between me and my sister.  Lots of boxes of them...

Yeah, the few things I've read where people have had to prove records were "from the old days" (read: pre-internet/personal computers),  so those older returns seem to be more important to keep than the ones since the days of e-filing. Still, I like things to be complete, so I'm just keeping them all. I have had to prove or provide numbers/dates for so many things over the years that I've decided it's just way easier to keep it all in an organized manner than to have to deal with the alternative.

Your Dad's house and basis--- that isn't a thing anymore, is it? As long as he has been there for a handful of years (5 I think?) basis isn't an issue unless he has gains of over $250 (I think for a single). Unless that is what you're up against, and yes, in that case, I'd keep meticulous records on that, as well.

Your parents' returns might come in handy when closing their estates. I think those should all be kept for at least seven years, too.  I plan to keep all of my parents' returns for that long, and possibly the final one forever.

I wonder if the accounting/lawyer types among us are more likely to keep this stuff, seeing as how we have read/experienced needing these old files for various reasons? I read multiple financial blogs/forums and the stories people tell have convinced me to just keep it all.

Photos.... yep. Multiple boxes to scan and tons of digital photos to go through and delete duplicates. That was supposed to by my "winter project". I don't know what happened, but winter has passed and my photos are untouched. I absolutely *dread* that task.

 

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2 hours ago, Wildcat said:

 

I wonder if the accounting/lawyer types among us are more likely to keep this stuff, seeing as how we have read/experienced needing these old files for various reasons? I read multiple financial blogs/forums and the stories people tell have convinced me to just keep it all.

 

Eh, I was a CPA back in my working days, and I keep nothing beyond 7 years. Those files take up space in my home which is precious, and I refuse to give them the space just in case of some random, rare event. 

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2 hours ago, beckyjo said:

Eh, I was a CPA back in my working days, and I keep nothing beyond 7 years. Those files take up space in my home which is precious, and I refuse to give them the space just in case of some random, rare event. 

 

My accountant said to check my Social Security records to confirm that my income was properly applied, then keep nothing beyond 7 years.

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5 hours ago, Wildcat said:

Yeah, the few things I've read where people have had to prove records were "from the old days" (read: pre-internet/personal computers),  so those older returns seem to be more important to keep than the ones since the days of e-filing. Still, I like things to be complete, so I'm just keeping them all. I have had to prove or provide numbers/dates for so many things over the years that I've decided it's just way easier to keep it all in an organized manner than to have to deal with the alternative.

Your Dad's house and basis--- that isn't a thing anymore, is it? As long as he has been there for a handful of years (5 I think?) basis isn't an issue unless he has gains of over $250 (I think for a single). Unless that is what you're up against, and yes, in that case, I'd keep meticulous records on that, as well.

Your parents' returns might come in handy when closing their estates. I think those should all be kept for at least seven years, too.  I plan to keep all of my parents' returns for that long, and possibly the final one forever.

I wonder if the accounting/lawyer types among us are more likely to keep this stuff, seeing as how we have read/experienced needing these old files for various reasons? I read multiple financial blogs/forums and the stories people tell have convinced me to just keep it all.

Photos.... yep. Multiple boxes to scan and tons of digital photos to go through and delete duplicates. That was supposed to by my "winter project". I don't know what happened, but winter has passed and my photos are untouched. I absolutely *dread* that task.

 

Yes, to dad's gain being over $250K.  Good for him, but need to go through the records!

My DH is an attorney, so we are quite the pair at our house - LOL.

I have a lot of space in my unfinished basement to keep papers.  Might think differently if I didn't have the space.

I hear you on the "my photos are untouched" thing too.  I love taking pictures and I didn't even get to process thousands of pictures for my boys' baseball team last fall.  I was thrown into caregiver mode for my dad last September.  Pictures used to be my happy place.

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I don't because the family CPA has saved these things for generations and I find it very interesting to go back and look at them once every ten years. But you could always move them to a different (locked) location.

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Alright guys, you sufficiently scared me. I’m not shredding the old ones. I am going to shred the investment papers and such extraneous stuff, but @Wildcat wigged me out and appealed to my obsessive-compulsive side. So - I’m going to buy a new file box for all the older files, organize seveen years into a different file box, stick it in the basement and hope it never matters. 

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On 4/24/2019 at 12:25 PM, beckyjo said:

Eh, I was a CPA back in my working days, and I keep nothing beyond 7 years. Those files take up space in my home which is precious, and I refuse to give them the space just in case of some random, rare event. 

And I am the opposite!  I keep EEEVERRRYYYTHING.

I just spent 2.5 hrs on the phone with IRS for a client yesterday re: his 2009 return (long story). 

Sorry @Quill I am no help.  When it comes to tax returns, I keep thinking "what if I have to deal with IRS" and I can't throw anything out.  I just can't! 

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