www.qns.com I LIC COURIER I AUGUST 2017 43
BY JOHN SAVIGNANO
The answer depends on the type of
document and also the kinds of transac-tions
you engaged in.
You should keep returns at least three
years. As a general rule, that’s how long
the Service has to question items on your
return and to bill you for any additional
tax. It’s also the time frame for you to file
an amended return and seek a refund.
However, the IRS can go back up to six
years if a return omits more than 25%
of income. If fraud is proved, there is no
limit. State tax returns may have to be
retained longer.
Don’t automatically throw out all returns
and records after three years. Look over
the old documents to see if you might need
any parts of them in the future. Hold on
to records that help establish the adjusted
basis of real estate. You should have a
separate file for each piece of realty you
own, including your home. Retain the files
until at least three years after you dispose
of the property. Ditto for securities transac-tions.
Be sure to keep your purchase docu-ments
for taxable mutual funds, stocks
and the like. You’ll need to include the
purchase date and cost on your return in
the year you sell the assets.
Among other records to keep: Those
showing stock splits, dividend reinvest-ments
and nontaxable distributions.
Heed this advice for property that you
either inherited or received as a gift. For
inheritances, you’ll need to know date-of-death
value. For gifts…the donor’s cost. So
you’d be wise to keep documentation of
these figures until after you sell the asset.
If you’ve made nondeductible payins to
IRAs or post tax payins to 401 (k)s…you
should keep records until three years after
the accounts are depleted. Be sure to file
Form 8606 to report nondeductible IRA
contributions. If you don’t, those contribu-tions
will be treated the same as deductible
payins when withdrawn. And remember
that all distributions from your traditional
IRA will be subject to tax unless you can
show otherwise. So make sure you retain
copies of Form 8606 and your 1040s
for each year that such payins are made.
It would also behoove you to keep Form
5498 or similar statements that reflect the
amount of IRA distributions.
Businesses should keep payroll tax
records for a minimum of four years af-ter
the due date for employees to file
their income tax returns for the particular
year. Data to be retained include wage
amounts, payment dates and employee
information. Also, copies of all W-4 forms,
payroll returns and amounts and dates
of tax deposits. Copies of worker health
coverage forms should be kept at least
three years after the deadline for filing
these documents. These are the 1094
and 1095 forms that many employers
are required to file to report employee
health insurance data. Records on cost
of assets, depreciation, etc., should be
retained for decades.
John Savignano
Advertorial
How Long To
Keep Tax Returns
and Records?
