Wednesday, March 14, 2012

Tax and Other Records: What do I need to keep?

All of us need to keep records that verify our tax return or other important life events for as long as they are needed. So what does this mean?

Federal Tax Return Documents and Receipts:

Generally you should keep your documents for three years from the later of the tax return filing due date OR actual filing date.  Federal record keeping may be longer than three years if errors on your tax return for over 25% of the tax obligation require record retention of six years.  If fraud or tax evasion is determined, the record holing period is indefinite.

State Tax Return Documents and Receipts:

The state of California can review your tax return after your federal tax return has been audited and officially closed.  The state can audit your tax return up to four years from the later of the tax return filing due date OR actual filing date.

Records You Should Keep Forever:

Some items that should be kept indefinitely included, but are not limited to, copies of your 1040 tax return, major asset purchases and sales (i.e. home mortgage, home closing documents, investment/stock transaction documents, insurance documents, and birth/death/marriage certificates).

Valuable Item Records:

Keep records of any valuable items purchased. This includes jewelry and other collectables.

 Non-tax Related Records:

You may need records for non-tax related purposes. Copies of divorce decrees, records of insurance and home sale closing paperwork are common examples of documents needed for other reasons.

Remember, when in doubt, it is always better to keep records them have to obtain them later when they are needed.

This information is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice and assumes no liability whatsoever in connection with its use. Because tax laws are constantly changing, and are subject to differing interpretations, we urge you to do additional research before acting on the information contained in this document.

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