THE WANDERING TAX PRO
Up-to-the-minute advice, information, resources, and, on occasion, commentary on federal and New Jersey state income taxes, and the various New Jersey property tax rebate programs, and insights and observations on tax policy and professional tax practice, by 45+-year veteran tax professional Robert D Flach.
Monday, April 30, 2012
HOW LONG SHOULD I KEEP TAX RECORDS?
Now that you have completed your tax
return – how long should you keep the return, and the records and documentation
that support items claimed on the return?
(1)Keep the paper copy of your tax returns (Form
1040 or 1040A plus all supporting Schedules and Forms) forever.This provides a permanent record of your
financial history.You never know when
the information on a prior year’s tax return will come in handy for a variety
of tax or financial related reasons, or just to satisfy personal curiosity.
(2)Keep all back-up documentation that supports
an item reported or deducted on your tax return for four (4) full years.This includes all applicable bank statements
and cancelled checks as well as W-2s, 1099s, 1098s, and appropriate receipts
and bills.You can toss all such
information for your 2011 tax return in December of 2015.
The IRS, and the appropriate state
tax authorities, has three (3) years from the due date (or filing date if you
had any extensions) of a tax return to audit and revise that return (except in
the case of tax fraud – then the IRS can go back forever).If you filed your 2011 Form 1040 by the
initial April 15, 2012 due date, “Uncle Sam” had until April 17, 2015 to audit
(3)Keep all confirms for the purchase
of stock, bonds and mutual funds, and other appropriate back-up (such as
notices of splits and records of any dividend reinvestments) for as long as you
hold the investment plus four (4) additional years.Keep the confirmation slip or other
documentation for the sale or disposition of the investment for four (4) years
after the sale or disposition.
Similarly, keep all Closing or
Settlement Statements for the purchase and refinancing of real estate, and
documentation of any capital improvements, for as long as you own the property
plus four (4) additional years.Keep the
Closing or Settlement Statement or other documentation for the sale or
disposition of the property for four (4) years after the sale or disposition.
And if you have invested in a
limited partnership or “sub-chapter S” corporation, or are a partner in a business
organized as a partnership, a “sub-chapter S” corporation or an LLC or LLP you
should keep the annual Form K-1 you receive from the investment or business for
as long as you own an interest in the entity plus four (4) additional years,
and keep any paperwork related to the sale or disposition of your interest for
four (4) years after the sale or disposition.