You know you need to save some of your financial records for tax
and other purposes, but which ones? And for how long?
You know you need to save some of your financial records for tax and other purposes, but which ones? And for how long?
You need to keep records throughout the year so you can take advantage of all favorable tax rules in the first place (deductions, credits, deferrals, and so on). Then you have to store your records, so you can substantiate each item on your return if the IRS audits you later on. The more organized you keep your records, the less you pay for tax return preparation and the less traumatic an IRS audit will be.
How long should you keep your records? Generally, the IRS can go back as far as three years, but if your income is understated by more than 25%, the limit is six years. To be safe, we suggest the following record retention guidelines:
Permanent. Tax returns, financial statements, contracts, corporate stock records, and corporate minutes.
Seven years. Canceled checks, bank deposit slips, bank statements, employment tax returns, expense reports, entertainment records, and inventory records should be kept at least seven years.
Seven years after relevant date. Home improvement records and investment records should be kept for at least seven years after the ownership period of the home or investment. Businesses should keep employee records for seven years after the period of employment.
Make a list of your documents and establish a written schedule for disposing of those records you need not keep permanently. If you have any questions about any records or recordkeeping requirements, contact our office.
