In the United States, over 10,000 people turn 65 every day.
This means that the number of retired people is increasing faster than it has in the history of the United States. A lot of people have questions about what life will be like once they retire.
Many people ask themselves, “How long should I keep tax records?” Remember that retirement doesn’t mean that you won’t need to calculate income tax. Retirement may mean that you don’t have to work your 9-5, but any income you earn still gets taxed.
How Long Should I Keep Tax Records?
The IRS offers us some guidance in this regard.
They recommend that you should keep all tax records for at least three years. This includes how long you should keep tax returns.
If you file with bad debt deductions or file at a loss of net income, you will need to keep your tax documents for at least seven years.
This is true whether you’re retired or not. Most people don’t keep their tax records as long as they should.
Many of those who do, stuff them into a file and forget about them.
Does Retirement Change Income Tax?
For most of us, income tax won’t change.
Remember that if you’re used to taking deductions on your paystubs, you probably won’t be anymore. If you are self-employed or pursuing a hobby as a primary income now that you’re retired, you may want to consider using paystubs to keep track of things.
A service like PayStubs.net can help you in this regard. It is far easier to keep track of your tax burden if you continue to pay yourself in a way you recognize. You’ve always had a paystub, so you might as well continue to get one.
If you don’t pay in taxes throughout the year, prepare for income tax season. Without having any money paid into taxes, you are going to have to pay every year. For those with large pensions, you can pay up to 45% tax on your social security income.
With this much tax burden in mind, it’s wise to keep things as organized and together as possible. You can consider paying taxes quarterly if you’re making enough to warrant it. Don’t let yourself be surprised by your taxes when the time comes.
Any Service Helps, Use One
If you don’t want to pay taxes throughout the year, then save that money up so that you have it when taxes come due. Not being prepared has left people in bad financial condition. If you’re retired, you might not have enough income to recover.
How long should I keep tax records? Again, that depends on what you filed, but at least three years.
Don’t let an audit ruin your retirement. Keep your records clear and straight. Use the tools available to help you better organize your retirement.
We hope this article helped clear up how long you should hang onto your tax records. Before you go, take a moment to look around our site and read other informative posts.
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