How long should you keep your tax records? | E-Neighborhood Advisor

Dear #NAME#, Once you've filed your tax return, what should you do with all the forms, receipts, canceled checks and other records scattered across your desk? Do you need to keep them, or can you shred them now? The IRS generally has three years after the due date of your return (or the date you file it, if later) to initiate an audit, so you should keep all of your tax records at least until that time has passed. But Kiplingers advises that you should keep some records even longer, and it's also a good idea to hold onto copies of the return itself indefinitely. Also keep in mind that you might want to keep certain documents around for non-tax purposes. For example, it might be wise to save W-2 forms until you start receiving Social Security benefits so you can verify your income if there's a problem. Here's a general rundown on how long you should keep certain common tax records and documents. One Year Keep pay stubs at least until you check them against your W-2s. If all the totals match, you can then shred the pay stubs. Take a similar approach with monthly brokerage statements—you can generally shred them if they match up with your year-end statements and 1099s. Three Years Generally speaking, you should hold onto documents that support any income, deductions and credits claimed on your tax return for at least three years after the tax-filing deadline. Among other things, this applies to: • Form W-2s reporting income • Form 1099s showing income, capital gains, dividends and interest on investments • Form 1098 if you deducted mortgage interest • Canceled checks and receipts for charitable contributions • Records showing eligible expenses for withdrawals from health savings accounts and 529 college-savings plans • Records showing contributions to a tax-deductible retirement-savings plan, such as a traditional IRA If you're among those taxpayers who no longer itemize deductions on Schedule A because the standard deduction was basically doubled beginning in 2018, you might not need to hold onto as many documents. For example, if you're not deducting charitable contributions anymore, then you don't need to keep donation receipts or cancelled checks for tax purposes. Six Years The IRS has up to six years to initiate an audit if you've neglected to report at least 25% of your income. For self-employed people, who may receive multiple 1099s reporting business income from a variety of sources, it can be easy to miss one or overlook reporting some income. To be on the safe side, they should generally keep their 1099s, their receipts and other records of business expenses for at least six years. Seven Years Sometimes your stock picks don't turn out so well, or you loan money to a deadbeat who can't pay you back. If that's the case, you might be able to write off any worthless securities or bad debts. But make sure you keep related records and documents for at least seven years. That's how much time you have to claim a bad debt deduction or a loss from worthless securities. Ten Years If you paid taxes to a foreign government, you may be entitled to a credit or deduction on your U.S. tax return—and you get to decide if you want a credit or deduction. If you claimed a deduction for a given year, you can change your mind within 10 years and claim a credit by filing an amended return. You also have 10 years to correct a previously claimed foreign tax credit. For these reasons, save any records or documents related to foreign taxes paid for at least 10 years. Your Flooring Consultant, Matt Capell Email: sales@capellinteriors.com Phone (208) 288-0151 Fax (208) 917-6160 P.S. Here's a joke for you! What is the difference between tax avoidance and tax evasion?  The jail walls.