Federal law requires you to maintain copies of your tax returns and
supporting documents for three years. This is called the “three-year law” and leads many
people to believe they're safe provided they retain their documents for this period of time.
Even if the original records are provided only on paper, they can be scanned and converted
to a digital format. Once the documents are in electronic form, taxpayers can download them
to a backup storage device, such as an external hard drive, or burn them onto a CD or DVD
(don't forget to label it). Create a Backup Set of Records and Store Them
Electronically. Keeping a backup set of records — including, for example, bank
statements, tax returns, insurance policies, etc. — is easier than ever now that many
financial institutions provide statements and documents electronically, and much financial
information is available on the Internet. You might also consider online backup, which is
the only way to ensure that data is fully protected. With online backup, files are stored in
another region of the country, so that if a hurricane or other natural disaster occurs,
documents remain safe.
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Caution: Identity theft is a serious threat in today's
world, and it is important to take every precaution to avoid it. After it is no
longer necessary to retain your tax records, financial statements, or any other
documents with your personal information, you should dispose of these records by
shredding them and not disposing of them by merely throwing them away in the
trash. |
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