Important documents: What to keep, what to shred?
What tax records should you save? And how long? All good questions. Here’s our tax expert Keith Hiatt with Breslow Starling in Greensboro with some insight…
Once you’ve filed your 2022 tax return, you may wonder what records you can toss and what you should keep.
Keep records that directly support income or expense items on your tax return. For income, this includes W-2s, 1099s, and Form K-1s. Also keep records of any other income you might have received from other sources. It’s also a good idea to save your bank statements and investment statements from brokers.
For expense items, keep your cancelled checks as well as support for any itemized deductions you claimed. This includes acknowledgments from charitable organizations and backup for taxes paid, mortgage interest, medical deductions, work expenses, and miscellaneous deductions. Even if you don’t itemize, keep records of expenses for child care, medical insurance if you’re self-employed, and any other expenses that appear on your return.
The IRS can audit you routinely for three years after you file your return. But in cases where income is underreported, they can audit for up to six years. To be safe, keep your records for seven years. If you own property or businesses in more than one state, check the statute of limitations in each state since some are longer than the federal statute.
Keep certain other records longer.
These include records relating to your house purchase and any improvements you make. Also keep records of investment purchases, dividends reinvested, retirement plan contributions, and any major gifts you make or receive. And finally, keep copies of all your tax returns and W-2s in case you ever need to prove your earnings for social security purposes.
Important records, including vehicle titles, wills, trust documents, insurance policies, contracts, and birth and marriage certificates, should be kept in a safe place. An inventory of your valuable property, along with photographs or a video, should be made and kept current in the event your house is robbed, damaged, or destroyed.
Keith S. Hiatt, CPA with Breslow, Starling Certified Public Accounts in Greensboro located at 3825 West Market Street, Suite 200, Greensboro, NC 27407. Phone: 336 292-6872