Ever wondered which tax preparation document support you should keep and which ones you should dispose of? Here are some document retention tips to bear in mind when you file away your tax documents each year.
- Always keep records that reflect the income and expenses you included in your tax return. i.e.. any document that outlines the income you received
during the year (e.g. W2s, 1099s, K-1s etc. and pretty much any document reflecting the expenses you claimed).
- Always keep bank statements and broker investment statements
- Always keep charitable donation statements and/or receipts received from charitable organizations
- Always keep proper record of investment purchases and reinvestment of dividends,
- Always keep records and receipts related to the purchase of your home and home improvements made to your home.
Ever wondered how long you should keep these records? Here are some more record retention tips concerning that:
- In general, always keep records for 7 years. Most taxpayers already know that the IRS can audit you up to 3 years after filing your return but what most taxpayers do not know is that the IRS can audit you up to 6 years after filing, if it is a case of under-reported income.
- Some records should be kept for longer than 7 years. This includes record of investment purchases, reinvestment of dividends and major gifts you have given and received.
- Also, make sure you keep records and receipts related to the purchase of your home or any home improvements you made to your home for at least 7 years AFTER you sell your home. This information will be needed for tax preparation purposes in the year you sell your home. Supporting documents and records pertaining to the the purchase of the home, the sale of the home, and any home improvements made, should be kept for at least 7 years after that return is filed.
If you have additional questions feel free to schedule a complimentary discussion with us HERE
Natasha Dornbush, CPA