Tax records to keep or discard

Taxes » Tax Filing » Tax Records To Keep Or Discard

Basic records are documents that everybody should keep. Although the Internal Revenue Service doesn't require you to keep your records in a particular way, it does urge taxpayers to keep them "in an orderly fashion" and in a safe place.

Basic records

FOR items concerning your ...KEEP as basic records ...
IncomeForm(s) W-2
Form(s) 1099
Bank statements
Brokerage statements
Form(s) K-1
ExpensesSales slips
Canceled checks or other proof of payment
HomeClosing statements
Purchase and sales invoices
Proof of payment
Insurance records
Form 2119 (if you sold a home before 1998)
InvestmentsBrokerage statemetns
Mutual fund statements
Form(s) 1099
Form(s) 2439

How long you should hang on to records

IF you ...THEN the period is ...
Owe additional tax and the next three situations below do not apply to you3 years
Do not report income that you should and it is more than 25 percent of the gross income shown on your return6 years
File a fraudulent returnNo limit
Do not file a returnNo limit
File a claim for credit or refund after you filed your returnLater of 3 years or 2 years after tax was paid
File a claim for a loss from worthless securities7 years

Also keep in mind that while the basic IRS review period is three years, there are exceptions -- in the tax collector's favor.

If the agency suspects you've underreported your income or has questions about a worthless stock write-off, look out. When examiners believe you've shorted your income amount on a return by 25 percent or more, they can come asking questions up to six years later. Add another 12 months for queries about that bad investment.

More details on tax record keeping are available in IRS Publication 552, Recordkeeping for Individuals.


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