With tax season behind us, many people think their tax responsibilities are over. This is untrue. It really isn’t over until you start next year’s organization. That’s because the more organized you are in the interim, the easier it will be to file next time. Particularly when major life events like buying a house, or refinancing, can change how you file, and require you to show past W-2s.
So while the IRS requires taxpayers to retain their filed taxes for no less than three years for audit reasons, we thought we’d offer some tips on retention and staying organized so filing next year will be a breeze.
Keep all of your tax-related information stored away in a folder or even a small box, or, if you are web savvy, keep sensitive documents stored in an online filing system. Find what works best for you and stick with it.
Make a List
To stay on top of next year’s tax season, draw up a list of documents you will need when you file. To begin, start combing through old tax documents to see how you filed, what your deductions were, and so on, so you’ll know what you’ll need. If you are so inclined, making an e-copy of all of your returns will also help your future endeavours.
Gather and Collect
Gather your income documents: W-2s, 1099s, student loan information, rental documents, etc.
Collect all of your expense documents: 1098-Ts, property taxes, business expenses, healthcare-related expenses, and so on.
Hold onto all of them until the statute of limitation passes, according to the IRS. These are also great to have if you need to file an amendment.
Retain Your Tax Returns
Federal returns, as noted, should be kept for three years, as long as there has been no associated issues with your taxes from that year.
This differs for people who have any unreported income totaling 25 percent of the gross income shown on their tax return. These are to be retained for six years.
For other returns that may need to be kept for longer than the standard three years, the IRS has made that specific information available to you.
For state returns, it varies, but here in Arizona it is recommended to keep returns for four years after a return is filed or is required to be filed, whichever happens to be later.
For additional assistance on all of your tax and financial needs, please contact us.