Three Reasons You Should Keep Your Tax Returns

Reasons to keep your tax returnsAre you the type of person who keeps absolutely everything? Or do you like to throw things away when you no longer need them? When it comes to tax returns, you should definitely think twice before aiming for the trash can.

Everyone knows how important taxes are, but most people don’t think of keeping all of their W2 forms forever. Why would they?

If you think keeping documents from the last five to ten years is enough, think again! No matter how good you are about filing your taxes accurately and on time, you should never get rid of those 1040s.

Here’s why:

1. Social Security Benefits – The most important reason you should keep your W2 forms and tax returns is to make sure that you don’t lose social security benefits. It turns out that the IRS doesn’t always keep old tax returns. You may not have heard about a man named David, who was a teacher that had to work two extra years before retiring! Unfortunately, he had shredded his old tax returns before learning that he needed them to retire and get his benefits. Keeping yours forever will prevent delays and help you get the benefits you have worked for on time.

2. Deductions on Assets and Investments – Another reason keeping your tax returns would be a smart move, is that it could help you if you’ve bought a house or other property. This is especially true if you have claimed deductions on investments, including depreciation. If you still have all the paperwork from your purchases, the IRS is less likely to give you any trouble about the deductions you’ve claimed.

3. Insurance History – If you had included all of your insurance information when filing tax returns, keeping all the paperwork can help you in the future. Most people forget about their insurance records. However, having the tax returns to prove how much your insurance company owes you can help you and your family get that money if you get sick or injured, and even in the case of death.

If you weren’t already saving your tax returns, hopefully now you see that there are a number of important reasons why doing so could be of major benefit to you in the long run.

Philip

7 Comments

  1. PLUS you can refile and maybe find refunds you never got. 🙂

  2. I’ve been storing all of mine by scanning them and saving them digitally. I don’t keep the papers and all the connecting documents but they are scanned and saved… Just in case. And with all the hoopla going on with the IRS these days, it’s a no-brainer.

  3. I keep everything, even store receipts for non-consumables and every business related receipt. My wife is a proponent of throwing things out including some front row, New Year’s Eve hockey tickets a couple of years ago. 🙁

  4. A couple of years ago I lost a pretty sizable deduction because I couldn’t find my proof of the residual loss from the previous year. Since then, I’ve kept everything in the file cabinet so that I never have to go through that again! In these economic times, every penny counts, and so it never hurts to double check and make sure that you’re writing off everything that you can.

  5. My file cabinet might look like a mess, but I keep important documents ever since I can remember! I never throw anything that might come back to haunt me years later.

    On a similar note, a friend of mine payed off her loan (personal loan she got a few years back) and thought she was done with it so she threw away the papers and everything. Last year, after 2 years have passed since she closed the account, the back contacted her to remind her that she still has 1 more payment to make. And since 2 years have passed, imagine how high the interest rates have gone. Never throw away important papers!

    • Agreed. I keep all my financial papers too – everything. I think I might be slightly obsessive/compulsive sometimes. But if any issues ever do come up in the future, it would only take me a minute or two to find any documents that I need to deal with the matter. So it’s well worth it for the peace of mind it gives me.

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