• Davis Law Group Team

Tax Records: What to Keep and For How Long??

A big question we get is how long should you maintain tax returns and supporting documentation?

As the year ends and you prepare for your 2016 tax return, here is some good advice and information on tax documentation and retention.

Tax Returns vs. Real Estate Records

Generally, the IRS recommends keeping copies of tax returns and supporting documents at least three years. Some documents should be kept up to seven years in case a taxpayer needs to file an amended return or if questions arise. Keep records relating to real estate up to seven years after disposing of the property.

Health Record Retention

Health care information statements should be kept with other tax records. You do not need to send these forms to IRS as proof of health coverage. The records taxpayers should keep include records of any employer-provided coverage, premiums paid, advance payments of the premium tax credit received and type of coverage. You should keep these — as with other tax records — for three years after you file your tax returns.

Document Security

Whether stored on paper or kept electronically, the IRS urges taxpayers to keep tax records safe and secure, especially any documents bearing Social Security numbers. The IRS also suggests scanning paper tax and financial records into a format that can be encrypted and stored securely on a flash drive, CD or DVD with photos or videos of valuables.

Document Organization and Access

Now is a good time to set up a system to keep tax records safe and easy to find when filing next year, applying for a home loan or financial aid. Tax records must support the income, deductions and credits claimed on returns. You need to keep these records if the IRS asks questions about a tax return or to file an amended return.

IRS Updates Authenticating Process

It is even more important for taxpayers to have a copy of last year’s tax return as the IRS makes changes to authenticate and protect taxpayer identity. Beginning in 2017, some taxpayers who e-file will need to enter either the prior-year adjusted gross income or the prior-year self-select PIN and date of birth. If filing jointly, both taxpayers’ identities must be authenticated with this information. The AGI is clearly labeled on the tax return.

Securely Destroy Old Documents

If you are still keeping old tax returns and receipts stuffed in a shoebox in the back of the closet, we would encourage you to rethink that approach. Keep tax, financial and health records safe and secure whether stored on paper or kept electronically. When records are no longer needed for tax purposes, ensure the data is properly destroyed to prevent the information from being used by identity thieves.

When disposing of an old computer, tablet, mobile phone or back-up hard drive, keep in mind it includes files and personal data. Removing this information may require special disk utility software but it is well worth the price and the effort in order to ensure security of your personal information.

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