The Records to Keep to Help With an Irs Tax Filing – And The Ones to Throw

Google+ Pinterest LinkedIn Tumblr +

Everyone knows someone who is like this – a certain kind of overcautious person who’ll leave nothing to chance; you’ll see in their closets or in garages or in perhaps paid storage, bags of neatly-organized files with old telephone bills from 30 years ago, tax records, umpteen receipts, every notice or office memo they got, every receipt for groceries they bought, bank statements and, of course, guarantee cards for 30 year old VCRs. Is there a reason why they do this? When any family member confronts them about why on earth anyone would need to do this, they usually have a cautionary tale about what happened to a friend once who got audited, and didn’t have the receipts she needed to back her story up. At a time when we entirely live our lives on computers, is there a point to saving receipts and paper records anymore?

Maintaining a little proof that you actually paid for the things you purchased and that you never failed to pay your taxes  actually makes a certain amount of sense. There is no legal limit to when an audit can take place. Three years from now, when you think that your taxes are all paid for and nothing’s been contested, the IRS can pull your records and haul you in to ask for receipts. If the IRS figures that you made a major mistake in your IRS tax filing – that you understated your income by 25% for instance – they can ask you to produce records from six years ago. There is just no limit to the amount of joy that the IRS can bring into your life. So the rule of junk collection should be that you keep all your receipts and check stubs for at least seven years, and keep records of your tax returns for ever. Those would be your 1099 forms, your W-2 forms, and your year-end bank statements.

If you have brokerage statements, you probably need to keep your entire cache of records of what you spent on your investments, and what you received from them. Basically, any kind of investment that brings you a profit or loss that you would need to show on your IRS tax filing in any year, you need to save records of. However there are ways in which you can go too far with the record-keeping, unless you run your own business, and you need to claim your cell phone bills and your gas bills as business expense deductions. Business owners will need to keep their monthly bank statements and credit card statements to be able to prove how much they earn, should the IRS not be happy with what they claim in their IRS tax filing.

What do you do with documents to do with your loans and your insurance? This might have nothing to do with an IRS tax filing, but it will be good practice to hang onto them until you’ve completely paid your loans off. Who knows when they’ll claim that you never paid the installments? Brokerage firm statements and bank statements are easily available on the Internet for free forever. Do you still need to hang onto them? Well, the IRS needs to see paper records. So it looks like the filing cabinet still sticks around.

Share.

About Author

Leave A Reply