How long should I keep my tax records for the IRS?
Record keeping is an essential step in avoiding IRS Problems. Keeping good records is necessary for tax purposes but can also be helpful when trying to obtain new insurance, a loan, or even for medical reasons. Knowing what records to keep, why you need to keep them, and how long to keep them is important.
Organization of Records
Record keeping is a personal thing. Use whatever method works best for you to keep them organized and at hand when you need them. Keep them by year and by category. You may want to keep all receipts pertaining to one item together.
You might want to check out a computer program to organize your records. If you input your information into the computer, remember to keep your receipts, proof of payments, and other documents to prove the information that you put on your tax return.
All you need is your checkbook to keep track of deposits and expenditures. Sales slips and receipts are helpful when you need to prove a deduction.
It is important to keep copies of all correspondence with the IRS including your tax returns. You may need the information on them to help you fill out future tax returns. You will also need them to refer to if you are audited or if you wish to amend a return. Another reason to keep them is for use by the executor of your estate.
If you determine that a tax return is missing, you can request a copy of both the return and all attachments from the IRS. Fill out Form 4506 (Request for Copy or Transcript of Tax Form) and send it along with the fee for processing to the address indicated on the form.
Why You Need to Keep Records
You will need records to prepare your tax return and to support any claims you make on your return. Records are necessary for more than tax purposes though. You will want to keep track of your sources of income, your expenses, and your property,
How Long to Keep Records
You will need to keep your tax returns until no longer needed to support information on future returns. Each tax return has a statute of limitations that will eventually run out. For the average taxpayer, a general rule of thumb is 7 years. If you have had IRS Problems such as underreporting income or not filing one year, you may want consider keeping your returns for a longer period.
Records no longer needed for tax purposes may come in handy for insurance or loan requirements. These records may need to be kept for more than 7 years.
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