Whether you use a professional tax preparer, or do your taxes with a pencil at the kitchen table, once your taxes are done, what do you do with all that paper? The temptation may be to keep it all, but that would be too much. Other people may want to keep only the return itself, but that would not be enough.
Tax experts with Internal Revenue Service audit experience recommend that you keep some records, whereas others are unnecessary. In a recent article, six post tax day tips were given to address what to keep and what to toss, so that in the event of an IRS tax audit, your records will support your return.
There are the six main areas of documentation and ideas related to each year's tax return.
- Keep all your personal financial information including W-2 forms, 1099s, 1098 forms, prior year returns, child care payment information, real estate tax information, professional dues and car expenses if you must drive for work.
- Keep your medical claim information organized per person or per medical claim.
- Keep any loss information if you've been a victim of identity theft. This could be critical later.
- Keep charitable record receipts.
- Keep your records together in a dry safe place.
- Keep your records for a full six years, the length of time in which the IRS can go back and audit personal income tax returns.
The experts didn't recommend keeping normal shopping receipts and bank statements. They did, however, recommend duplicating your tax records as a protection from fire, flood or theft. There are free online storage places that will store scanned documents safely and securely.
If you receive a letter from the IRS requesting information, it may be a good idea to consult with a legal tax professional before contacting the IRS. An honest misstatement could cause trouble. Everything between you and your attorney is strictly confidential.
Source: The MainStreet, "Taxes Done? Keep These Records Handy," Brian O'Connell, April 23, 2012