What to Keep and How Long?

Tax records should be kept on a year-round basis, not hastily assembled just for your annual tax appointment. Without tax records, you can lose valuable deductions by forgetting them on your tax return, or you may have unsubstantiated items disallowed if you are audited.

Generally, returns can be audited for up to three years after filing. However, the IRS may audit for up to six years if there is substantial unreported income. The three and six year limits start with the filing of a tax return; if no return is filed, the time limit never starts to run.

Which Records are important?

• Records of income received
• Expense items, especially work-related
• Home improvements, sales, and refinances
(for homes with profit potential of $250,000 or more)
• Investment purchases and sales information
• The documents for inherited property
• Medical expenses
• Charitable Contributions (records vary with value of gift)
• Interest and taxes paid
• Records on Nondeductible IRA contributions

How Long should Rrecords be kept?

You already complete the 8283 form if you donate and take the deductions and that is the form the IRS will be looking at moving forward. You can view this form on the IRS website. Just do a search for it.Now the tough part; along with being required to have the appropriate documentation, the IRS will be coming down hard on you with penalties if you overstate the value of the donations.

There are some records worth keeping permanently, partly due to long-term needs and partly because they take up very little room. Consider permanently retaining a copy of each year's tax return. Contracts, Real Estate buy/sell records and records of property improvements should be retained for seven years after the property is sold.

If you are in business, your record requirements are more extensive. Please call us; we will be happy to assist you with a system of record retention.