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  • Writer's pictureBrian R. Schobel, CPA

Record Keeping for Tax Purposes: Duration and Vital Documents

Record Keeping for Tax Purposes: Duration and Vital Documents

When it comes to taxes, maintaining accurate records isn’t just a convenience—it's a necessity. Knowing how long to keep documents and which ones are crucial can make all the difference in your tax preparation.

How Long Should You Keep Documents?

The general rule for tax records is to keep them for at least three years from the date you file your tax return. However, there are some exceptions:

  • Keep records for seven years if you claimed a loss for bad debt or worthless securities.

  • Keep records for six years if you've understated your income by more than 25%.

  • Indefinitely keep records if you didn’t file or filed a fraudulent return.

Essential Documents to Keep

  1. Tax Returns: Your actual tax return is a starting point for all your record keeping.

  2. Income Statements: W-2s and 1099s that report employment income, as well as other income documents, should be kept.

  3. Expense Documents: Receipts, invoices, and other proofs of payment support deductions or credits you claim.

  4. Bank and Credit Card Statements: These can serve as a proof of payment and support for expenses or deductions.

  5. Investment Records: Keep records showing purchases and sales of stocks, bonds, and other investments.

  6. Property Records: Real estate purchase documents, home improvement receipts, and rental property records are crucial.

  7. Proof of Payment: Canceled checks, bank transfer receipts, and credit card slips can prove expenses.

Tips for Record Keeping

  • Organize by Year and Category: Have separate folders for each tax year, and within those, categorize documents.

  • Go Digital: Scan physical documents and keep an encrypted digital archive.

  • Stay Informed: Tax laws change, so what you need to keep might change too.

Organizing your tax documents is crucial. They are the evidence of your financial story with the IRS. For peace of mind and more personalized tax solutions, the experts at BRS CPA are at your service. We’ll ensure your records are immaculate and tax season is smooth sailing.

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