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There is no simple answer for this question. Records such as receipts,
canceled checks, and other documents that prove an item of income or a
deduction appearing on your return should be kept until the statute of
limitations expires for that tax return. For Federal tax returns this is
usually three years from the date the return was due or filed, or two
years from the date the tax was paid, whichever is later. For state tax
returns, this is usually four years, since the statute of limitations is
usually longer than the Federal requirements.
The Federal
three year rule has some exceptions:
You should
keep certain records for longer than 3 years or indefinitely. These
records include, but are not limited to:
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Federal and state income tax returns -
should be kept indefinitely, along with proof of mailing (registered
mail, certified receipt, etc) or e-filing.
-
Supporting documents - such as W-2s, 1099s,
cancelled checks, receipts, credit card statements, and all other
documents that verify income and deductions should be kept for a minimum
of 7 years.
-
Stock acquisition statements - If you own
stock in a corporation, keep the purchase records for at least 7 years
after the year you sell the stock. This data will be needed in order to
prove the amount of profit or loss you had on the sale.
-
Stock and mutual fund statements that show
dividend reinvestments - Many taxpayers use the dividends they
receive from a stock or mutual fund to buy more shares of the same stock
or fund. The reinvested amounts add to basis in the property and reduce
gain when it is finally sold. Keep statements at least 7 years after
final sale.
-
Property purchase and improvement records -
Keep records of home, investment, rental property, or business property
acquisitions AND related capital improvements for at least 7 years after
the property is sold.
-
IRA Basis - Form 8606 tracks your basis in
traditional IRA's. This information is needed for when you start making
withdrawals to determine the portion of the distribution that is
non-taxable. Also, keep track of contributions made to a Roth IRA. These
records need to be kept indefinitely.
-
Records of nontaxable income - You may need
to show that income which was NOT reported on your tax return came from
nontaxable sources.
-
Personal records - such as birth
certificates, marriage licenses, divorce agreements, wills, copies of
estate and gift tax returns, etc. These should be maintained in a
permanent file. These are important documents that may be needed to
verify information on a tax return but are also needed in various life
situations.
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