While the IRS could come calling with questions about your tax documentation, there is also the risk of identity theft associated with improperly disposing of unneeded documents, according to the Federal Trade Commission. While there are many documents associated with tax filings that should be saved forever – like Social Security cards, birth certificates, proof of citizenship, etc. - documents more directly related to annual tax filings can be a little more difficult to judge when they should be stored or shredded.
What not to shred
Of course, there are many tax documents that need to be kept, but they don't need to be around forever, noted the FTC. For example, receipts for home improvements that homeowners wrote off should be kept until they sell their homes, there is no solid set of time. However receipts and canceled checks used in tax filings should probably only be kept around for a period of seven years. This time period of seven years also applies to W-2s, 1099s and all other records for things related to deductions or employment.
Some documents only need to be kept for up to one year. Pay stubs, medical bills, bank statements and similar bills that may have been used during the filing process may be shredded up to a year after filing your taxes. Typically, it's advised that pay stubs can be shredded after they've been checked against W-2 forms to ensure there are no discrepancies.
Finally, when it comes to past tax documents like returns, it's generally wise to be safe and file them away forever.
What to shred
There are a number of documents that should be shredded immediately after using them, too, the FTC report said. Receipts from purchases and ATM transactions or canceled checks (unless they're being used in tax filings), credit card and utilities bills that have been paid, expired warranties, and even credit card mailers with pre-approved cards should all be shredded. Shredding for all these documents is vital because without being shredded, it may allow someone to open an account in a taxpayer's name, and that can do serious damage through credit fraud.
Why it's important
With all this in mind, the IRS is working to highlight the risks of tax-related identity theft and show what people can do to prevent becoming victims of this crime. That includes making sure that any electronic data on their computers is properly protected with anti-virus and firewall software. Additionally, individuals should learn more about identifying potential scam emails and phone calls from people pretending to be a representative of the IRS or some other well-known organization.
Finally, Americans should always make sure that in addition to shredding unneeded tax documents, they're also properly protecting the ones they're keeping, urges the IRS. By storing all tax records together - preferably somewhere that can be locked - and cataloging them properly, people will know exactly where all the necessary information is.
The more consumers can do to ensure they keep in mind everything they need to do to protect themselves from tax ID theft, the better off they're going to be when it comes to putting up the proper safeguards. Knowing what to shred and when to shred it is important, but it would be wise to make that part of a holistic identity protection effort that lasts all year.
While you are taking the right steps to help protect your identity, it’s always good to have someone watching you back and looking out for you identity, even when you are too busy to do so. That’s where Identity Guard can help. From a comprehensive credit monitoring program to a personal privacy protection plan, Identity Guard can help you find the right service to fit your needs and lifestyle.