Tax Day has come and gone and hopefully you’ve used your tax records to file your taxes and you can safely put all of tax year 2012 behind you. Chances are you’re relieved the whole return process if finally over. Perhaps you’ll even celebrate by taking advantage of a free massage this week courtesy of HydroMassage. If you’ve managed to get through your taxes in one piece there’s certainly room to celebrate, but don’t make confetti out of your 2013 tax records just yet.
Federal and state income tax returns, along with any statements or receipts related to them, should be kept for at least three years or whenever the period of limitations for your return runs out. If there is a chance that the IRS may suspect that you under-reported your income by 25% or more then you will need to keep your records for seven years. There is no deadline if you committed fraud or failed to file a return. Hopefully you won’t be audited, but if you are the IRS reserves the right to review your tax returns filed during the Period of Limitations. (So if you need confetti material try to shred your tax returns that are more than three years old.)
However, Tax Help MD realizes that not everyone is the pack-rat that the IRS wants you to be so in the interest of allowing you to do a little spring cleaning we’re providing you with a list of what tax records you should keep and what you can throw out.
- Income Tax Returns
- Sales Receipts and Monthly Bank/Credit Card Statements
- Utility Bills if you write off a home office
- Cancelled checks
- Medical Bills and cancelled Insurance Policies
- Mortgage Note and HUD-1 Settlement Statement
- Records of Selling a stock or house
- Proof of a bad debt that you’ve written off or of worthless securities that you’ve taken a tax break for.
- Contracts and leases
- Records documenting the cost basis of any taxable investments (you should keep these as long as you own them.)
What you should throw out:
- Paycheck statements
- Monthly investment account and quarterly retirement plan statements
- ATM printouts
- Old insurance claims
- Canceled checks for closed tax years
- Credit card statements older than the 3-7 year statute of limitations
- Old annual reports from stocks and/or mutual funds
Obviously these lists aren’t all encompassing, but by now you should get the drift. A good rule of thumb is to keep tax records which prove anything you claim on your tax returns in the same place as your tax returns for as long as the statute of limitations applies.
We are in 2013, however, so this doesn’t necessarily mean keeping a file with physical documents in it. Try scanning everything and storing your records digitally (make sure to keep a backup somewhere). There are some handy portable scanners that could work nicely for this purpose… or if you have a smartphone there are scanning apps that could make it even easier to scan your files on the go.
Remember, sometimes we learn the correct way to do things a little too late. If your tax records aren’t in tip top condition and you’re in need of some help, Tax Help MD can certainly lend a hand.
Looking for a tax doctor? Need some professional help in dealing with your IRS tax concerns? My Tax Help MD offers professional and state-of-the-art consultancy regarding all kinds of IRS tax issues. We can provide you complete guidance for the purpose of tax resolution and tax settlements.