Saturday, June 12, 2010

Save it or shred it? Some recordkeeping tips


Once you've filed your 2009 tax return, you may wonder
which records you should keep and which ones you can run
through the shredder. Here are a few suggestions.


If the IRS asks, you must be able to prove the validity of your tax return, which includes providing substantiation for each item reported on your tax return.

Here's a list of the most common records you need to keep.

* W2s, 1099s, and other records of income received.

* Receipts, cancelled checks, and other documentation
  for deductions taken.
* Written acknowledgments for charitable contributions.
* Records related to home improvements, sales, and
* Investment purchase and sales information, including
  brokerage statements.
* Records on IRAs and other retirement plans.

The IRS does not require that you keep your records in any particular way. The only requirement is that your records allow you and the IRS to determine your correct tax liability. So the key is to keep checks, receipts, and other records that document the income and deductions you've put on your tax return.

Wondering how long you need to keep these records? Keep tax records for as long as your return is subject to an IRS audit. Unless fraud, evasion, or a substantial understatement of income is involved, the IRS generally has only three years in which to question your return. Because of various combinations of the statute of limitations and technical provisions in the law, keep
records related to a specific tax return for seven years, rather than just for three years. If a record will affect future years, you may need to keep it even longer. And copies of tax returns should be kept permanently. 

For any assistance you need or questions you have about
recordkeeping, contact our office.