How many years should we keep old tax returns? Shredding or recycling?

What about electronic copies? If I scan all my documents, can I shred the paper versions? And do you need to keep all the supporting documents (like W-2s, receipts, etc.) or just the final return?

Electronic copies are perfectly acceptable to the IRS as long as they're legible and you can produce them if requested. Many people scan their documents and then shred the originals to save space. As for supporting documents, you should keep all supporting documentation for the same time periods - this includes W-2s, 1099s, receipts for deductions, property records, investment statements, etc. The tax return itself isn't enough if you're audited - the IRS will want to see the supporting evidence for the claims made on your return.

How does this work with really old returns? I have stuff from the 90s my parents gave me when they moved. Does the system tell you specifically which docs you can shred vs keep?

Sounds interesting but I'm always concerned about uploading sensitive financial docs online. How's their security? Do they keep copies of everything indefinitely?

The system has specific guidelines for returns from any year - it categorizes documents by their retention requirements and gives you a clear "safe to shred" date for each one. For those really old returns from the 90s, most can definitely go unless they involve property you still own or have special circumstances. Their security is actually what convinced me to use them - they use bank-level encryption and don't store your actual documents after analysis unless you specifically request document storage. They just analyze the content, give you the retention guidance, and then you can choose what happens with the data.

Wait how does this actually work? They somehow get you to the front of the IRS phone queue? That seems impossible with how backed up they always are.

Sounds like a scam. Nobody can magically get through to the IRS faster than their standard queue. They probably just put you on hold themselves and then connect you eventually. Waste of money.

It's not about skipping the line - they use an automated system that continually calls the IRS for you until they get through, then they call you when they have an agent on the line. It saves you from having to sit on hold for hours. The system basically does the waiting for you. Yes, you still end up talking to the same IRS agents eventually, but the difference is you don't waste your day listening to hold music. I was skeptical too but it connected me in about 15 minutes when I had previously given up after 3 hours on hold.

Any recommendations for a good shredder that won't jam constantly? I tried to shred my old returns last year and my cheap shredder died halfway through.

I've had good luck with the AmazonBasics 8-sheet crosscut shredder - it's around $50 and can handle staples too which is super helpful for tax docs. The key is not to rush it or overfeed. For a big batch of old returns, you might consider using a shredding service at places like UPS or Office Depot if you're comfortable with that. They charge by the pound and will give you a certificate of destruction.

Good system! Do you keep electronic backups too? I'm paranoid about losing the originals in case of fire or something.

@Roger Romero That s'a really smart organizational system! I ve'been thinking about implementing something similar. Quick question - for the property-related folder you keep indefinitely, do you include things like receipts for major home improvements? I ve'heard those can help reduce capital gains tax when you eventually sell, but I m'not sure if that applies to all improvements or just certain types.

@Roger Romero Yes, definitely keep receipts for major home improvements! Things like kitchen remodels, new roofs, HVAC systems, flooring, etc. can all be added to your home s'cost basis and reduce capital gains when you sell. I learned this the hard way when I sold my first house and couldn t'find receipts for a $15k kitchen renovation - that could have saved me real money on taxes. The key is they have to be improvements that add value or extend the life of the property, not just regular maintenance and repairs. @Anna Kerber I do keep electronic backups of everything in the cloud - I scan important docs to Google Drive as a backup. Better safe than sorry!

That's really smart advice about scanning before shredding! I'm curious about the encryption part - do you use any specific software to encrypt the PDFs, or just rely on the cloud storage security? I've been hesitant to store tax documents digitally because I worry about hackers, but your approach sounds like it gives you the best of both worlds. Also, how do you organize the digital files - do you create folders by year or some other system?

This is really comprehensive advice, thank you! I hadn't thought about the carryforward losses aspect - that's a great point. I actually do have some capital loss carryforwards from a bad stock investment a few years ago, so I'll definitely need to keep those returns until I've used them up completely. The 25% underreporting rule is also something I wasn't aware of. Is there an easy way to check if you've accidentally underreported by that much? I'm pretty careful with my taxes but mistakes happen, and I'd hate to shred documents only to find out later I needed them for an extended audit period. Also, any specific crosscut shredder recommendations? I'm ready to invest in a good one after reading all these horror stories about identity theft from recycled documents!