How long are you supposed to keep tax records
How long are you supposed to keep the receipts and other documents that support the numbers you put on your tax return? K.G. via email
The Internal Revenue Services expects taxpayers to maintain certain financial records and sets guidelines for how long you are supposed to save this information. The records you are required to keep go hand in hand with the preparation of your tax return.
Keep cancelled checks, receipts, bank and brokerage statements, credit card statements, pay stubs, letters from recipients of charitable contributions (for contributions of $250 or more), utility bills, and any other documentation that adequately proves the correctness of the numbers that appear on your tax return.
The IRS recommends that you keep records that support the numbers in your tax return for at least three years from the time you file your tax return or the due date of the tax return, whichever is later. If you amend your tax return, the three-year rule still applies. Save your tax receipts for three years from date on which you file your amended tax return.
The three-year rule comes from the fact that the IRS has three years from the later of the due date of your tax return or the date on which you file your return to examine the return and request supporting documentation.
If you don't pay all of your income tax with your tax return, it is recommended that you keep your tax records for three years from the due date of the return or two years from the date on which you complete the payment of your taxes, whichever is later.
If you own investments in items such as stocks, bonds, and collectibles such as valuable art or antique cars, keep receipts for the acquisition of these investments for as long as you own the investments, and then three years after the year in which you sell the investments. The same rule applies to items you use in your business, such as office equipment, machines, computers, and business furniture.
If you own a home, it is recommended that you keep the records from the purchase of the home for as long
as you own the home, as well as three years after you file the tax return for the year in which you sell the home.
I like to think of these rules as minimum requirements. You can always keep your records longer. Just be sure you don't start throwing things away sooner than these limits.
Set up a record-keeping system that is easy to use and maintain for years to come. Any of the following options work well for storage of tax and other financial receipts and documents:File folders
Decide how you want to store your records, and then label the folders, envelopes, or whatever you have chosen, by year and by type of receipts that they will contain. For example, if you decide to use three-ring binders, you can set up one binder for each year, label the binder with the year number on the outside, then use dividers to separate the different types of information stored within the binder.
Personally, I like to use file folders to keep my receipts handy during the year. In the spring, after I finish my tax return for the prior year, I transfer all of the prior year receipts into a three-ring binder and place the tax return for that year as the first thing in the binder. The receipts are organized behind the tax return in the order that the amounts appear on the tax return. Other receipts for the year that I want to save but that don't appear on my tax return are filed at the back of the binder.
Find a place in your home or office where you can store your documents and where you'll always know to look when you need to retrieve a document.
The choice you make for how you want to save your financial records is not a final choice. If you try one record-keeping system and find that it doesn't work the way you had hoped, you can always try a different system.Source: www.funwithtaxes.com