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Tax Forms to Securely Shred in Clearwater


As your Clearwater business grows and thrives, so does the chance that you’ll get a visit from the Internal Revenue Service. Most of these audits are about as comfortable as a tooth extraction without laughing gas.

It’s therefore important — and legally required — to keep hard copies of your tax documents on hand for a few years. But in most cases, you don’t have to keep them forever. Here are some guidelines for what tax forms and papers you can eventually shred and when you can do it.

The 3-Year Rule (and When to Break It)

The IRS reserves the right to audit taxpaying businesses for three years after filing. So your financial officer should retain most tax-related documents for at least three years. It’s both a legal requirement and a good security policy to do so.

There are a couple of exceptions. If you follow proper procedures, some documents can be shredded one year after filing. Old pay stubs can go if they’ve been fully cross-checked against W-2 forms. Monthly brokerage statements can be deleted after reconciling them with annual statements and 1099 forms.

Tax Forms That You Can Shred After 3 Years

The IRS allows you to dispose of these documents after their 3-year audit window expires:

  • W-2 forms
  • 1098 and 1099 forms
  • Tax returns
  • Charitable contribution receipts
  • Contributions to tax-deductible IRAs, 401(k)s, or other retirement savings accounts
  • Records for taxable investments (stocks, bonds, mutual funds)

There are some exceptions, which we’ll examine below.

The 6-Year Exception

There’s one situation in which the IRS can prolong the three-year statute of limitations. That’s when a business’s tax return reflects a “substantial understatement of income.” If you omit 25% or more of your gross income in a given year, the IRS reserves the right to audit you for six years. If they argue that your underreporting was fraudulent, they can extend the audit indefinitely.

If you’re in this situation, you’ll have to keep all of your W-2s, 1099s, and expense receipts for at least six years. If and when the IRS clears you, you can shred these documents.

Best Post-Filing Practices

When you don’t need your past tax documents, have them shredded as soon as you can. There’s a wealth of critical information on these files. An identity thief couldn’t ask for better inside information — so keep them away by destroying it as soon as you are legally allowed to do so.

If there’s a crucial need for keeping back-up copies, consider scanning documents for digital storage, either onsite or in the cloud. But be aware of the heavy security risk in that situation, too.

Complete Destruction of Sensitive Documents in Clearwater

ShredQuick helps Clearwater businesses to sort through their financial documents and destroy the ones they don’t need. Call us to find out more.

 

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