How to Manage Tax Related Documents Securely
- How long are you storing your files?
- Are you shredding paper records securely?
- Is cloud storage really a solution, or should I be cautious?
Shelf Life of Financial FilesCatherine M. Williams, vice president for financial literacy at the credit-counseling firm Money Management International, explains that there are two main reasons to keep financial records.
“It’s either for backup to a tax issue or for proof that you did something like make a payment,” Williams said to the New York Times.She’s right. According to the I.R.S website, the tax organization requires that individuals be able to produce records proving any income, deductions or credit claimed for at least three years from the date of a return. The I.R.S. also requires that individuals be able to produce such records for six years if they fail to report income that is more than 25 percent of their gross income. There is no statute of limitation for failure to file or tax fraud.
“My recommendation would be never throw away copies of your tax returns and checks made out to the government — anything else, I would say keep for at least six years,” Jude Coard, a tax partner at accounting firm Berdon L.L.P, said to The New York Times.We know what you’re thinking: How are you going to store all those financial files? It’s worth freeing up the extra office space alone to investigate off-site record storage.
Secure ShreddingIt might be a good idea to be very careful when deciding what stays and what should be shredded. Luckily for you, Corodata has its own list of the do’s and don’ts of shredding. To get you started, here’s a short list of old documents to shred:
- price lists
- customer information
- customer lists and database printouts
- credit card receipts
- payroll records
- financial statements