NEW YORK —
■ The three-year rule: A key reason to hold old tax returns and supporting documents is to address any issues the Internal Revenue Service raises. In most cases, the IRS has three years after a return is filed to do an audit, so keep past tax returns for at least three years.
If the IRS suspects you’ve under-reported income by 25 percent or more, it can audit returns going back six years. And if it suspects fraud, it can go as far back as it wants.
If you’ve filed your return electronically, you can retrieve a copy on the IRS website. But it’s best to consider that as a backup copy only.
■ Look to the future: Some records, such as weekly pay stubs, can be discarded after you’ve received your year-end pay statement. Even if you need to view a specific pay period, that stub can probably be retrieved from your employer.
But keep records that may be a factor in future tax returns. One example pertains to individual retirement accounts, or IRAs. If you make a nondeductible contribution to an IRA this year, you might want to keep a record of that for years to come, when you begin to take distributions from the retirement account. At that point, such documentation could be necessary to establish that part of that future payout is tax-free.
■ Keep property records: Records that apply to assets that could grow in value, such as a home, should be retained until you sell the asset. In addition, keep any records of major upgrades or additions, which can help establish the value of the property.
■ Consider going digital: Banks, credit card issuers, and most other businesses issue electronic statements, which you can retrieve at will online or retain as copies on your computer.
For paper records, make digital copies and store them on your computer.
‘‘The original is the best evidence, but scanned copies will suffice for most purposes,’’ said Ted England, a tax attorney in Ventura, Calif.
Another consideration is where to store digitized documents. Hard drives can be damaged by viruses. Flash drives can become corrupted. CDs can malfunction. One option is to back up data online. Cloud services provide online storage for free and gigabytes of extra space for paid subscribers. But data stored in the cloud can potentially be susceptible to identity theft.