Organizing and saving information throughout the year will cut tax return preparation time and can even save you money. Save any information related to:
- Income from wages, dividends, interest or business: Forms W-2, 1099, and K-1, bank statements, brokerage statements
- Investments: Forms 1099 and 2439, brokerage statements, mutual fund statements
- Deductions and credits (child care expenses, medical and dental expenses, business use of home, charitable gifts, vehicle sales tax, alimony): Receipts, invoices, mileage logs, bank or credit card statements, canceled checks
- Home and property: Closing statements, invoices, proof of payment, insurance records, receipts for improvements
Knowing what information to save and for how long can be confusing. As a general rule of thumb, keep tax returns and related documents for at least three years from the April 15 filing deadline.
- Tax return forms and schedules plus all information to support what you claimed on your return, especially records related to property, investments, or business assets (for depreciation). While there are exceptions, the IRS has 3 years to assess additional tax and audit returns. Three years is also the amount of time you have to amend your return.
- Many income-taxing states have an additional year to audit individual returns.
- Forms W-2, 1099, etc. because the IRS has six years to contact you if you've failed to report income.
- Any information regarding loss from worthless securities or bad debts.
Business owners should keep tax information for at least four years. That includes employment records, gross receipts, invoices, bank statements, proofs of purchase, asset records, databases, emails and even voicemails.
Any other documents that you do not wish to keep should be properly disposed of by shredding. Contact us today to help you properly dispose of your unneeded tax documents.
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