Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the "three-year law" and leads many people to believe they're safe provided they retain their documents for this period of time.
However, if the IRS believes you have significantly underreported your income (by 25 percent or more), it may go back six years in an audit. If there is any indication of fraud, or you do not file a return, no period of limitation exists. To be safe, use the following guidelines.
April 15 has come and gone and another year of tax forms and shoeboxes full of receipts is behind us. But what should be done with those documents after your check or refund request is in the mail?
Please be aware that if the IRS believes you have significantly underreported your income (by 25 percent or more), it may go back six years in an audit. If there is any indication of fraud, or you do not file a return, no period of limitation exists. To be safe, use the following guidelines.
Personal Documents To Keep For One Year
While it's important to keep year-end mutual fund and IRA contribution statements forever, you don't have to save monthly and quarterly statements once the year-end statement has arrived.
- Credit Card Statements
- Medical Bills (in case of insurance disputes)
- Utility Records
- Expired Insurance Policies
- Supporting Documents For Tax Returns
- Accident Reports and Claims
- Medical Bills (if tax-related)
- Sales Receipts
- Wage Garnishments
- Other Tax-Related Bills
- CPA Audit Reports
- Legal Records
- Important Correspondence
- Income Tax Returns
- Income Tax Payment Checks
- Property Records / Improvement Receipts (or six years after property sold)
- Investment Trade Confirmations
- Retirement and Pension Records (Forms 5448, 1099-R and 8606 until all distributions are made from your IRA or other qualified plan)
If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.
Source: Thomson Reuters