How long do I keep Tax Records? A Guide

 


I'm sure you have asked this question at least one time right after you have filed your tax return every year.

As a Professional Tax Preparer/Accountant, I get asked this question a lot. 

So, here is the basic rule of thumb for holding onto those very important documents:

• MINIMUM 3 YEARS After Date Filed for All Tax Returns and Records used to prepare the tax return.

• ADDITIONAL 3 YEARS For Sale/Disposal of REAL ESTATE PURCHASED (including your home). Keep the records that show the original cost of the property (purchase price) plus improvements done over the years.

• ADDITIONAL 3 YEARS For Sale/Trades of INVESTMENT SECURITIES (stocks, bonds, crypto, mutual funds, etc.). Keep the records showing the purchase amounts to include stock splits, dividend reinvestments, and nontaxable distributions. Also keep track of when any bonds or Treasury bills/notes mature.

• ADDITIONAL 3 YEARS After Depleting Accounts that show payments made to NONDEDUCTIBLE IRAS or POST TAX 401(k)s to prove the NON TAXABILITY OF THESE withdraws and be sure to fill out FORM 8606 with your tax return in the year of the contribution as well.

• MINIMUM 4 YEARS for all PAYROLL RECORDS to include both state and federal tax reports as well as records showing wage amounts paid, payment dates, and employee's data such as names, social security numbers, and employment dates.

• FOR SEVERAL DECADES keep RECORDS supporting the COST of ASSETS and DEPRECIATION claimed because, in some cases, the depreciation on some assets can last for up to 40 years.

Scan or Save copies of these documents in your computer and on flash drives so you don't have to come up with STORAGE for the paper.

ALSO, when disposing of any PAPERWORK that contains personal information such as NAMES, DATES OF BIRTH, AND SOCIAL SECURITY NUMBERS, be sure to SHRED THESE DOCUMENTS and don't just toss them into the garbage!

Visit our website and stay informed on the latest IRS information that will help you save money and make empowered choices.  Sign up to receive timely information by joining our community, www.Dorseytaxplace.com

Don't hesitate to reach out with any questions.

Thank you for reading!
Bonnie Dorsey

972-672-8850

P.S. did you know we have a secure portal where you can upload all of your important documents doing away with files and papertrails?  www.Dorseytaxplace.com /
Contact us for more information:
 972-672-8850
Dorseytaxplace@gmail.com

Comments

Post a Comment

We enjoy friendly feedback and conversation at Your Tax Place. Thank you for joining in! We will make every effort to reply to your comments.

Popular posts from this blog

How To Organize Business Receipts for Taxes 2023

Image
How to Organize Receipts for Small Business  As a business owner, you have probably heard this statement over and over again:  KEEP YOUR RECEIPTS FOR TAXES!    Although this STATEMENT is TRUE, you should also KEEP the IRS in mind so that those RECEIPTS will count if an audit is required. Here are a few suggestions on how to KEEP THE IRS in mind when COLLECTING , STORING , AND PRESENTING those BUSINESS RECEIPTS. WHICH RECEIPTS ARE DEDUCTIBLE FOR MY BUSINESS? Owning, operating, and maintaining a business COSTS MONEY. But, when you buy things for the BUSINESS, they must be legally deductible. EXPENSES must be an ORDINARY AND NECESSARY EXPENSE  for your specific industry to be able to legally deduct it on your taxes. The WAY that you  STORE , ORGANIZE and PRESENT the receipts for business purchases as the PROOF will also be a consideration by the IRS to allow the deduction or not.  STORING and ORGANIZING...
Read more

5 Tips to Avoid Tax Filing Delays and IRS Rejection of Tax Return

Image
  5 tips to Avoid Tax Filing Delays and IRS Rejection of tax return When it comes to having your tax return prepared and successfully filed, you can easily AVOID these COMMON TRAPS that managed to cause IRS REJECTIONS and FILING DELAYS for several of my clients in this past tax season. TIP #1: IPPIN - Identity Protection Personal Identification Number  If you or your spouse APPLIED to the IRS to get this 6 DIGIT PIN number to prevent others from fraudulently filing your tax return, BE SURE that your MAILING ADDRESS is correct with the IRS AND WATCH FOR A MAILED LETTER FROM THE IRS in the beginning of the year that will contain this number. Without this number, YOU CANNOT FILE your tax return; PLUS , AT THIS TIME, it is FOREVER LINKED to your SOCIAL SECURITY NUMBER and cannot be removed or received EXCEPT BY MAIL or through your IRS account. TIP #2: FORM 1095-A for HEALTH INSURANCE purchased through THE MARKETPLA...
Read more

Sole Proprietor, LLC or Corporation- Which is the best for your business?

Image
 Sole Proprietor, LLC or Corporation Which is the best for your business? As a business owner, you should be aware of what each type of business entity offers in terms of taxes, liability protection, and control over the business. The easiest and most common business type is the Sole Proprietorship. As a sole proprietor, you automatically get the new (and misunderstood) responsibility of "self employment" taxes. Sole Proprietorship You have NO LIABLITY protection for your personal assets in case of a lawsuit You have COMPLETE CONTROL over how to run and manage your business There are not usually any start up fees required Most new businesses start out this way until they get a better education about the other options. LLC business type The LLC is also very popular choice among new business owners, but it is not always chosen for the right reason.  Some people claim that there are more tax advantages than a sole proprietorship. However, the truth is, an LLC does not differ...
Read more