TMTW #247- What Records To Keep

Tax and Money Tip this Week:
What Records To Keep 
August 26th, 2015 | No. 247

This week we will discuss a question that I get in my CPA practice a lot:
How long should I keep certain records?

Here are some recommendations:

Keep Forever:

  1. Copies of Tax Returns only
  2. W-2s and 1099 income forms
  3. Roth IRA statements(to prove that you have already paid taxes when you withdraw at retirement)
  4. Life insurance policies
  5. Birth and death certificates

Keep for 3 years:

  1. All Backup records of the latest 3 years of Federal and NC income tax returns
  2. Bank Statements, brokerage statements,  1099s, deductions, etc.

Why 3 years?

Because the statute of limitation is 3 years under which the IRS or NC Department of Revenue may change your return or you can amend your return. However, if these agencies believe that a taxpayer has underestimated their income by 25% or more, this period becomes six years.  If the IRS believes you filed a fraudulent return or did not file a return at all, there is NO statute of limitations.

Therefore, never throw away your tax return copies that we always provide you.  It is possible, but very difficult and time consuming to try to get copies from the governmental agencies of your past tax returns, especially old ones.

Also, when deciding what to store in a safety deposit box,  keep in mind when someone dies, the safe deposit box may be sealed by taxing authorities. This action may cause problems in probating and executing the will; therefore, store original copies of the will in a fireproof safe at home as well as with your attorney.

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week.

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