If
you are long on forms, but short on time and
experience we can help you
Keep or
Toss? What Tax Documentation Should You
Save?
National Association of Tax
Professionals (NATP) Appleton, WI – Once you’ve
completed your taxes and amassed all your
receipts, forms, and statements, what do you do
next? What gets kept and what gets tossed?
Remember, the main reason to save records of any
type is to substantiate the information reported
on tax returns.
Save:
- Copies of your completed tax returns,
attachments, and receipts that verify receipt of
your filed forms by the IRS.
- Records that help identify sources of income
including those that:
o Track expenses;
o Determine the value of property; or
o Support any numbers or claims made on your
prepared tax returns.
Place your records in files listing the year and
the following titles: Income, Expenses, Home,
and Investments. You can safely toss other
paperwork in the trash unless you prefer to keep
items for historical value.
Other statements that may affect future
transactions include:
- Investment account statements and home
expenses. These are important to keep as long as
you own the investments, plus a minimum of three
years afterwards unless your state requires a
longer statute of limitations.
- Gifts and inheritances that establish values.
Following your state’s statute of limitations
is a good rule of thumb for saving all records,
though some accountants prefer to keep six to
ten years of substantiation. Of note to
remember: A return that was never filed has no
statute of limitations. Also, the statute of
limitations for returns where income was
understated by 25 percent or more is six years.
After you file this year’s records with those
from past years, weed out old files that are
beyond the statute of limitations. But, before
tossing, examine receipts once more to see if
they contain information for future
transactions. If not, go ahead and toss them.
‘Check 21’ regulations that allow
banks to send copies of cancelled checks in our
bank statements assist in keeping cancelled
checks in an organized, space-saving manner.
Another organizational tip: scanning your
documents and writing them to a CD or DVD. It's
much easier to keep six CDs than six years worth
of shoeboxes.
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