Knowing What Tax Records to Keep

The following YouTube video is from the IRS.

Having your financial life organized is important, especially when it comes to your taxes. It not only makes tax preparation much easier, it also positions you better to respond to any IRS inquiries.

The IRS doesn’t have any specific requirements as to which system you use to organize your records. You may store them the old fashioned way or even keep them electronically, as more and more people are now doing. While the method you choose isn’t important, what you save and how long you save it does matter.

Here is a list of the most important things to save:

  • As a rule of thumb, keep any documents related to income, such as your W-2 and 1099, for three years.
  • Save documents that support all deductions and credits that you claim as well. These include medical bills and tuition statements if applicable.
  • If you own a home or have investments you will need to keep all records related to those items.
  • Keep copies of your family’s healthcare records, which are usually IRS Forms 1095-A, 1095-B, or 1095-C.
  • Make sure to hold onto your tax returns from the last three years. This will help with preparing future tax returns and computations on amended returns.
  • For stocks, capital assets, or IRAs, hold onto any documents which support your purchase price or cost basis. You will need them when you sell these assets and for three years afterwards.
  • Finally, if you run a business, keep all tax-related documents for four years.

Bottom line, keeping good tax records is important. If you are unsure if a document needs to be saved, either hold onto it anyway or contact your tax professional for advice.

About cozbycpa

Heather L. Cozby is a CPA on the South Shore and Cape Cod. The managing partner of Cozby & Company, LLC, Heather has the resources and experience necessary to provide quality professional services on a timely basis and at a reasonable cost. She specializes in tax planning & preparation; audit, review & compilation services; management advisory services; bookkeeping; and accounting. Her unique niche is in working with homeowners’ associations and condominium trusts, advising with rental real estate, and providing outsourced financial consulting for mid-sized companies. She is more entrepreneurial than most accountants, and offers the best of both worlds - providing the services of a larger firm while retaining the ability to connect with her clients on a personal level.
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