A Quick Recordkeeping Guide

Is your cabinet overflowing?  Do you hesitate to purge tax information because you’re not sure what to keep and what to discard?  Here’s a quick guide to help you cut through the clutter.

  • Expenses.  Substantiation for deductions includes charitable donation acknowledgments, receipts for employee business expenses, and automobile mileage logs.  Retain these at least seven years after you file the return claiming them.
  • Income.  The same seven-year rule also generally applies to common tax forms such as 1099’s showing interest, dividends, and capital gains from banks or brokerages, and Schedule K-1’s from partnerships and S corporations.  The IRS recommends holding on to your W-2’s until you start collecting social security. Tip:  Shred interim income reports once you’ve compared the totals to annual forms.
  • Retirement Accounts.  You may have to calculate the taxable portion of distributions, so keep records detailing your contributions until you’ve recovered your basis.
  • Tax Returns.  The statute of limitations is usually three years but can be six years if under-reported income is involved.  In cases of fraud or when no return is filed, the IRS has an indefinite time period for assessing additional tax.   As a general rule, keep federal and state returns a minimum of seven years.

For additional information, including how long you should store business papers and payroll reports, please call.  We’ll be happy to help you establish a records retention schedule.

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