What to keep and how long?
Tax records should be kept on a daily basis, not hastily assembled just for the annual tax meeting. Without tax records, you can lose valuable deductions by forgetting them on your tax return, or worse yet, they may be disallowed if you are audited.
Generally, the IRS can request an audit for up to three years after filing, four years in California. If there is substantial unreported income, the IRS may audit your tax returns for up to six years.
Which records are important?
- Records of income
- Records of non-deductible IRA contributions
- Job related expenses
- Home improvements and refinance cost for homes
- Investment purchases and sales information
- Documents of inherited properties
- Charitable contribution records
How long should records be kept?
It is a good idea to keep your income tax return and supporting documents at least four years and preferably six, after the return filing date if space is not critical.
Depreciation records for rental real estate and business property, date acquired, and schedule of depreciation claimed in previous years, should be kept for four years after the property is disposed of.
Important papers such as estate and gift returns, divorce and property settlements agreements, deeds, title insurance policies, and all trust documents should be kept in a permanent file or perhaps safe-deposit box.
If you're not sure which records to discard, please call me. I will be happy to assist you.