Is your file cabinet overflowing? Do you hesitate to purge tax information because you’re not sure what to keep and what to discard? Here’s a quick guide to help you cut through the clutter.
- Expenses. Substantiation for deductions includes charitable donation acknowledgments, receipts for employee business expenses, and automobile mileage logs. Retain these at least seven years after you file the return claiming them.
- Income. The same seven-year rule also generally applies to common tax forms such as 1099s showing interest, dividends, and capital gains from banks or brokerages, and Schedule K-1s from partnerships and S corporations. The IRS recommends holding on to your W-2s until you start collecting social security.
- Tip: Shred interim income reports once you’ve compared the totals to annual forms.
- Retirement accounts. You may have to calculate the taxable portion of distributions, so keep records detailing your contributions until you’ve recovered your basis.
- Tax returns. The statute of limitations is usually three years but can be six years if underreported income is involved. In cases of fraud or when no return is filed, the IRS has an indefinite time period for assessing additional tax.For additional information, including how long you should store business papers and payroll reports, please call. We’ll be happy to help you establish a records retention schedule.
- As a general rule, keep federal and state returns a minimum of seven years.
Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in the McLean and Tysons Corner, VA. Gilliland & Associates specializes known for our superior knowledge and aggressive interpretation and application of tax laws, we help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and Twitter.