Tuesday, May 29, 2012

What the IRS wants you to do with your tax paperwork

Keeping tax records longer than 3 years can get crazy...
Now that you've filed your taxes, whether by electronic tax filing or by mailing your income tax return, what are you supposed to do with all your receipts and legal papers?

The Internal Revenue Service wants to to keep all documentation and copies of your returns for no less than 3 years, in the event of an audit or lien.

This includes wages, bills paid, receipts from credit cards and charitable gifts, checks that have been voided, invoices, records of mileage and any other records that helped you get a deduction or credit. Pretty much anything that helped you claim taxable or non-taxable income on your tax return should be kept.

There are documents you should keep longer as well. Anything regarding your real estate or home, transactions made on the stock market, accounts for retirement and any business property(rental or otherwise) should be held for capitol gains and losses which may be accrued later than 3 years.

In the event of an audit the IRS will want to review statements and receipts of income and expenditures, so keeping those handy in their own section of your tax records will be important. These documents will be seized in the event of a fraud investigation, so keeping your records easy to decipher and find will give you the best opportunity at leniency.

People who have to pay penalties, back taxes, and/or interest from a fraudulent return, tax evasion or simple tax return delinquency are subject to intense scrutiny beyond the 3 year limit that applies to average taxpaying citizens.

Be sure to burn or shred any tax documents you do throw away to avoid identity theft risks. Also remember to look at the document twice before you throw it away, so as not to accidentally get rid of pertinent tax records.

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