What Records to Keep Year-To-Year

A Tax Tip Article from The Tax Institute at H&R Block.

You have forms, statements, policies, records and more.  Keeping it all organized can be quite a chore.  What do you keep?  And for how long?  Here are a few tips for managing your document storage.

Keeping tax records in case of an audit

According to the IRS, you should keep your tax records from 3 to 7 years depending on your situation.  Additionally, the IRS recommends keeping copies of your W-2 forms until you’re eligible for retirement.  Having these documents can help you be prepared in the event of an audit.  In fact, many people do not realize that a tax examiner will not have your old returns.  Instead, they will ask you to bring your past tax returns to the audit.

If you need a copy of an old return, your H&R Block Tax Professional can help.  Or if you did your taxes online with H&R Block At Home, you can access a past return at http://www.hrblock.com. You can also request of a copy of a past return from the IRS for a small fee using IRS Form 4506.

More reasons to keep those tax records

Having past tax records on hand can be quite useful for reasons other than an audit.

  • Having a reference for next year’s return: previous returns can give you a starting point when accounting for all your deductions, credits and more.
  • Figuring the tax free distributions from your IRA by referencing the nondeductible contributions to it filed on Form 8606.

Keeping records of large purchases

You might make large purchases of items that you may want to sell later (your home being one of the largest).  Keeping records and receipts related to these items can help you identify a gain or a loss when you do sell.  Plus, having these records can help you determine an insurance reimbursement amount if you have a claim due to damage or theft.  Some examples of the records you want to keep include:

  • Records detailing improvements to your home.
  • Receipts regarding the purchase, maintenance, and improvement of rental property.
  • Records of capital assets such as coin and antique collections, jewelry, stocks, bonds, and more.

Other things to consider

Keeping your bank account and loan records can help you verify your taxable income in the event that the IRS believes your lifestyle appears more comfortable than your income would support.  Here are some other records and documents to consider keeping:

  • Insurance policies: to help you determine your reimbursement in case of a loss from a casualty or theft, medical expenses, or certain business losses.
  • Family records such as marriage licenses, birth certificates, etc. – to prove a change in filing status or dependency exemptions.
  • Health history and medical procedure records: to prove necessary and deductible medical expenses.
  • Receipts or other records showing purchases: to prove payment for large purchases.

Cleaning out the file cabinet

Once you determine that you no longer need receipts or old credit card statements, it’s a good idea to shred the records before you throw them away.  With today’s concerns about identity theft, the extra step to destroy the documents can give you peace of mind.

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