Record Retention Guide, Taxpayers Rights, IRS Withholding Calculator And Where Is My Refund

Record Retention Guide

  • How Long To Keep Tax Records
  • Why Keep Records?
  • Kinds of Records To Keep
  • Income
  • Expenses
  • Home
  • Investments
  • Proof of Payment
  • Specific Records

You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep records that support items shown on your return until the period of limitations for that return runs out.

The period of limitations is the period of time in which you can amend your return to claim a credit or refund or the IRS can assess additional tax. Table 1 contains the periods of limitations that apply to income tax returns. Unless otherwise stated, the years refer to the period beginning after the return was filed. Returns filed before the due date are treated as being filed on the due date.

Table 1. Period of Limitations

IF you... THEN the period is...
Owe additional tax and (2), (3), and (4) do not apply to you 3 years
Do not report income that you should and it is more than 25% of the gross income shown on your return 6 years
File a fraudulent return No limit
Do not file a return No limit
File a claim for credit or refund after you filed your return The later of 3 years or 2 years after tax was paid.
File a claim for a loss from worthless securities 7 years

Property: Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. You must keep these records to figure your basis for computing gain or loss when you sell or otherwise dispose of the property.

Generally, if you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up. You must keep the records on the old property, as well as the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition.

Keeping records for nontax purposes: When your records are no longer needed for tax purposes, do not discard them until you check to see if they should be kept longer for other purposes. Your insurance company or creditors may require you to keep certain records longer than the IRS does.

Primarily you keep records as support for tax purposes, bookkeeping & accounting purposes, insurance purposes or for obtaining loans. Your ability to maintain good records allows you to easily handle requests for information.

These records provide you with accurate sources of income and expense, basis in any property you may own, accurate tax return preparation and documentation should you have to explain anything reported.

As none of us can remember every transaction, we need to have good recordkeeping habits. Store all documentation timely and your job becomes easier. If you wait too long, then you may not be able to tie it to the appropriate income or expense. Or the document may fade and be unreadable.

Therefore, be sure to keep good records! It will save you in the long run.

Basic records

These are your foundational items to maintain on file

 
Home
  • Closing statements
  • Purchase/Sales Invoices
  • Proof of payment
  • Receipts for Improvement Costs
  • Insurance records - losses/liability
Investments
  • Brokerage/Mutual Fund statements
  • Form(s) 1099
  • Form 5498(s)
  • Form(s) 2439
Income
  • Form(s) W-2
  • Form(s) 1099
  • Form(s) K-1
  • Bank and Investment account statements
Expenses
  • Receipts
  • Sales slips
  • Bills/Invoices
  • Canceled checks
  • Proof of payment
  • Charitable donation letters

Anything that proves what you have reported as income on your tax returns. This may include salary/wages, dividends, interest, self-employment income, partnership or S Corporation distributions. Your records may also help prove what is taxable and what isn’t. Wages and salaries are reported on form W-2. It is recommended that you keep your copies of your W-2 so as to ensure that the Social Security records accurately reflect your wages and contributions.

Anything that will prove the accuracy of a deduction or credit claimed on your tax returns. This includes large medical expenses (surgery, nursing home), charitable contributions (cash and items), mortgage interest, real estate and personal property taxes, and child care expenses

With the ever changing real estate market, you need to keep all records enabling you to accurately calculate your basis in your home. This basis is the purchase price plus any improvements along with closing costs. If there are any casualty losses, then these records would also be necessary to maintain. Also, closing statements of purchase and sale are a must.

Your investment records need to be able to assist you in determining the basis (true cost) so when sold the gain or loss is accurate. Purchase price, sales price and any commissions are necessary. Dividends, Dividend Reinvestments, stock splits, royalties, original issue discounts and much more are typically on investment records

Simply put, proof of payment is any document that details a payment you have made. Normally it is a receipt, however in this day and age there are many ways to obtain proof of payment. Copies of checks are an easy one. Make a copy before you send it out or write the details in the check ledger or have all check copies saved by your bank and included in your monthly statement. Cash and electronic funds transfer are a little different because you need to have documentation outlining payment made via these means. Sometimes you make payment by payroll deduction. Ensure you keep the pay stub or the final pay statement of the year to prove payment of expenses.

Business Use of Home - Identify area exclusively used for business and related expenses

Casualty and Theft Losses - proof of loss and documents supporting type and amount of claim

Child Care Credit - name, address and Tax ID of child care provider

Charitable Contributions - all cash and non-cash donation receipts and letters

Credit for Elderly or Disabled - VA or physician statement certifying you are permanently and totally disabled for anyone under age 65.

Divorce - Court documentation (separation agreement, separate maintenance or support decree)

Education Expenses - tuition statements, savings bond interest, employer reimbursement, transcripts, canceled checks and receipts

Energy Incentives - invoices, manufacturer certification statement, canceled checks

Gambling - all gambling winnings are taxable. Need to keep file with date, type and place of gambling and amounts won or lost.

Health Savings/Medical Savings Account - Receipts of payments made with distribution amounts. Contribution amounts show on W-2 and/or on health savings account statements. Retirement Accounts - Forms 5498, 1099-R and Form 8606 until all assets are exhausted. These forms show contributions and distributions.

Medical/Dental Expenses - Receipts, mileage log, parking fees, tolls, bus and taxi fares.

Mortgage Interest - Form 1098 shows mortgage interest for the year.

Taxes - Withholding is shown on forms W-2 and 1099-R. Estimated tax payment forms, state income tax returns, form 1099-G for unemployment or state refunds, mortgage interest, tax assessments, real estate and property tax records.

Tips - Daily records must be maintained. You can use the IRS form found in Publication 1244.

Taxpayer Rights

  • THE RIGHT TO BE INFORMED
  • THE RIGHT TO QUALITY SERVICE
  • THE RIGHT TO PAY NO MORE THAN THE CORRECT AMOUNT OF TAX
  • THE RIGHT TO CHALLENGE THE IRS'S POSITION AND BE HEARD
  • THE RIGHT TO APPEAL AN IRS DECISION IN AN INDEPENDENT FORUM
  • THE RIGHT TO FINALITY
  • THE RIGHT TO PRIVACY
  • THE RIGHT TO CONFIDENTIALITY
  • THE RIGHT TO RETAIN REPRESENTATION
  • THE RIGHT TO A FAIR AND JUST TAX SYSTEM

Federal Refund - Where's My Refund

Amended Return - Federal Amended Return Status

IRS Online Account - IRS Online Account

Federal Tax Withholding - Tax Withholding Estimator

Federal Tax Record Retention Information - IRS Record Retention Guide