Old tax records represent an invaluable long-term data resource that may play an important role in securing a future loan or benefit. Taxpayers can, however, dispose of other tax-related documentation after a suitable period.
Taxpayers must keep their tax returns indefinitely because some future financial transactions will require them, according to Kiplinger. Lenders, providers of disability insurance and other critical agents ask for tax returns as a necessary part of the application paperwork.
Tax records provide an extra information resource for taxpayers who need to reference a hard-to-find piece of financial information. Kiplinger notes that taxpayers can produce their records as proof of tax dividend payments, reinvestments of capital gains or other transactions.
While tax records should remain safely filed away, many of the supporting documents used to corroborate that information can eventually go into the trash. Self-employed taxpayers should keep business expense receipts for a six-year period, beyond which the IRS rarely conducts audits. Taxpayers can also discard investment records and home improvement documents, but only after they have sold those assets.