Once a business’s taxes are filed, which documents should be saved, and for how long? Ideally, businesses want to retain only what needs to be kept. However, this begs the question of how to dispose of the other documents. The following will explain which documents should be kept and which can be discarded.  Most importantly, we’ll discuss which documents should be shredded to keep confidential information safe.

Tax Documents to Keep

Before tending to documents that should be destroyed, it’s important to know which should be kept safe. Especially, if the documents will be needed in the future. For example, perhaps the business needs to claim a refund or credit on an amended tax return.  It is critical to retain these documents in case they get audited by the IRS.  The tax documents that should be kept for a few years after filing taxes include:

• W-2 forms
• 1099 forms
• Tax returns
• Receipts and supporting documents: receipt books, invoices, and cash register tapes should be kept for at least 3 years
• Financial Statements: credit card and bank statements containing sensitive information. (Bank/Credit Card statements should be kept for at least 7 years in case of an audit.
• Deposit information (cash and credit sales)
• Employee Records

For businesses, the IRS states, “[…] the length of time you should keep a document depends on the action, expense, or event the document records. You must keep your records as long as needed to prove the income or deductions on a tax return.”

After filing, you’ll want to retain your tax returns for at least three years.  And, all employment tax records should be kept for at least four years. (After the date payroll taxes are due or are paid. Whichever one comes later).  After this time, however, these documents should be shredded to protect the privacy of the employees.  It also helps to prevent identity theft.

Any document containing social security numbers, home addresses, or other personal information must be shredded after the necessary retention time.

The period of limitation for tax documents differs depending on the type of document.  

For example, if you didn’t report income that should have been reported. And, it’s more than 25% of the gross income stated on the return. These records should be kept for six years.  If you deducted the cost of bad debt or worthless securities, keep these records for seven years.

On the other hand, if you didn’t file or you filed a fraudulent return, there is no statute of limitations.  This means that the IRS can investigate at any time.  If you have records connected to the property, a period of three years of limitations applies to any deductions you make. These records often include the deeds, cost basis records, and titles.

Tax Documents To Dispose Of

You may think, “That is a lot of paper to keep around!”.  Thankfully, technology has made it possible to safely store most of these documents digitally.  You also do not need to keep all of your tax-related documents.

For example, if you have client and vendor information such as contact details, contracts, or pricing agreements. These records can be shredded once they have served their purpose. 

Some of the documents that can be destroyed right away include:

• Draft copies of tax returns
• Tax returns beyond the period of limitations
• Canceled checks older than one year
• Bank statements
• Other financial projects and outdated business plans with sensitive information

Proper Document Disposal

Now that everything is categorized as a “Keep” or “Dispose” document, it’s time to discard the relevant documents.  They should not be merely thrown in the garbage without a second thought.  Criminals can use the information in these documents, especially financial information, for identity theft.  Not to mention, disposing of such materials in this manner is far from environmentally conscious.

For businesses, proper document disposal is especially critical. This is due to several privacy regulations that require the secure shredding of customer or employee documents.  If these regulations are not followed, it can lead to costly lawsuits. In turn, these lawsuits can quickly damage the business’s reputation. 

Secure Shredding Services For Tax Documents

IDSAutoshred is a reliable solution for destroying confidential tax documents.  We serve numerous industries all with different compliance measures that must be followed.  Regardless of a business’s objectives and more specialized requests, we can provide the proper eco-friendly shredding service!

Servicing the Delaware, Pennsylvania, New Jersey, New York, and Connecticut areas, we also offer mobile shredding trucks! These make on-site shredding a convenient option for all our customers. Are off-site services better suited to the company’s needs? We also offer secure off-site shredding services at our facility!

For more information, please speak to one of our professionals.  We can help ascertain which shredding service is better for your circumstances. This tax season will be an even better experience, resulting in greater peace of mind. Call IDSAutoshred today at (877) 886-4732 or leave us a message directly on our site here.