Monday, April 22, 2013

Ouch!: This Is What Happened to a Man Who Threw Out His 20 Year Old Tax Returns

Eva Rosenberg reports:

Let’s look at the case of David, a teacher. He is a responsible and ethical person who always files his tax returns on time — and correctly. He should be in that three-to-six-year category. Or so he thought.

Recently, David decided to clean out his old files and shred all his un-needed records. He kept the last decade’s worth. No problem, right?

Right. Until he pulled his Social Security record to look up his retirement benefits. He found they didn’t show enough quarters of work. David was short two years. The Social Security Administration (SSA) was missing data from years when he had a job outside the school district.

David started working in his teens. Surely, he has 40 credits (or 10 years) in the system? Yes, he does. But having gotten rid of his older tax returns, he can no longer prove it. David asked the IRS for copies of certain missing years, dating back to about 20 years ago. Not only did the IRS not have copies, but they didn’t even have electronic transcripts going that far back.

What can David do? Not a thing. He accepted this philosophically, knowing he must work two more years to build up his benefits.

How can you avoid this problem? It’s easy. Never, ever throw out a tax return. The tax returns themselves don’t take up much space. If you need to thin out the files, you could probably shred the back up — but hold on to the W-2s and 1099s. They may turn out to be valuable.

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