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Hold On To Those Tax Forms! Keeping Your Tax Records Can Help You Protect Your Retirement Benefits

If you’re like most Americans, you just filed your taxes. This means you probably gathered important tax documents to help. But now that you’re done, what are you going to do with those documents? Many Americans follow the general rule of thumb that you should keep your tax documents for six or so years, since that’s how far back the IRS will look when conducting an audit.[1] Once those six years have passed, many people trash these documents.

We don’t think this is the best idea. In fact, we think that Americans should hold on to their tax documents forever. On top of that, we recommend that you make a duplicate copy and store it separately from your originals, or electronically – just in case something happens to your originals, like a flood or a fire in your home.

Why do we recommend that Americans be so protective of their tax records? Because these documents are incredibly helpful if you ever have a hard time collecting retirement benefits that you’ve earned. Depending on your age, that could be decades from now. Even if you’re already retired, retirement plans sometimes make mistakes, and have been known to contact retirees years after retirement to request money they have overpaid. In situations like this, hanging onto some of your important tax documents can help you prove that you are entitled to a retirement benefit.

We know this from experience. A lot of the issues that clients contact the Pension Counseling and Information Program about arise from a lack of documents. Oftentimes, when clients have been denied pension benefits, they cannot prove that they have earned a benefit.

Information in your tax documents can help prove a number of important facts that relate to your retirement benefits. For example, tax records will show whether you received any retirement benefits in a given year. This is useful if you claim a retirement benefit and your retirement plan says that it already paid you, you can prove them wrong. Tax records can also help prove that you worked for a former employer for the number of years required to earn a benefit. This information can also be key to determining the size of the retirement benefit you have earned.

So which tax documents should you keep in particular? If in doubt, keep everything. That said, your W-2 forms and 1040, or whatever you file instead of a 1040, will have the most helpful information. Keep those tax documents. You never know when you might need them.




[1] There is a statute of limitations that applies to Federal income taxes (this means a limit on when the IRS can claim you didn’t pay enough). The limit is three years from the date the return was due (or actually filed if this date is later), except (1) the limit is seven years from the date the return was is due (or actually filed if later) if the income shown on the return understates income by more than 25 percent and (2) if there is an attempt to evade or avoid paying taxes, in which casethere is generally no statute of limitations.

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