How Long Should You Keep Your Records?

Brown & Associates, certified public accountant, has some advice for you this upcoming tax season as you plan to file taxes.

imagesAre you a hoarder and keep everything and anything forever? Or do you purge every year? For tax purposes, try to find a middle ground which, in tax purposes land, could be somewhere between “forever” and “immediately.”

As a general rule from the Internal Revenue Service, you should keep your tax returns and supporting documentation for “normally” three years. However, a return that is fraudulent, or if income is not reported, or even if a return is not filed, then the IRS can come after a taxpayer any time, even as long as 10, 20, 30 years later!

Since most people are not fraudulent taxpayers, it could be a good idea to keep the tax returns themselves indefinitely. There may be information contained in the return that would be necessary for a future event.

Another reason to keep your returns forever is that should the worse happen and the IRS calls you in for an audit, the examiner will more than likely ask you to bring your tax returns. You would think the IRS would have them handy, but that’s not the way it works. So having your old returns allows you to easily comply with your auditor’s request.

The supporting documentation that relates to your current tax returns (those within the 3 year range) you should keep are:

1. Income – wages, interest/dividend statements, etc.
2. Mortgage interest statements
3. Property tax bills

If any of these items were deductible, then the documentation supporting that deduction should be kept:

Medical expenses
Charitable contribution receipts
Child care statements
Business expenses
Professional and union dues
Uniforms and job supplies
Automobile mileage logs
Travel & other employee business expenses

Keep bank statements and loan documents should as well. These documents could provide more information or provide additional proof of income if necessary.

images-1What about the “other” stuff? Here is a general list:

  • W2s, forever
  • Contracts, forever
  • Real estate records, forever
  • Mortgage loan papers – keep until the mortgage is paid off
  • Records relating to improvements to your home – keep during ownership period plus 7 years.
  • Records relating to purchase and any improvements to rental property – keep as long as own property plus 7 years.
  • Broker statements – shred monthly/quarterly ones as new ones arrive, keep the annual statements until you sell the investments.

For a more complete overview on record retention please visit our website.

Brown & Associates, P.C
11175 Cicero Drive Suite 100
Alpharetta, GA, 30022
Phone: (770)980-9121