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How Long To Keep Tax Returns and Records?
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41-18 CRESCENT ST
LONG ISLAND CITY, NY 11101
718-707-0295
47-46 VERNON BLVD
SECOND FLOOR
LONG ISLAND CITY, NY 11101
718-707-0295
Hernan Barona, E.A
hernan@savignano-cpa.com
www.savignano-cpa.com
ObtainMyRefund.com
BY JOHN SAVIGNANO, CPA
The answer depends on the type
of document and also the kinds of
transactions 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
transactions. Be sure to keep
your purchase documents 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
reinvestments 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-ofdeath
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 contributions 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payins when withdrawn.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 after 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 is a partner with
Savignano Accountants & Advisors
located at 47-46 Vernon Blvd., Second
Floor, in Long Island City. If you have
any questions or require additional
information, please call John at 718-
707-0955.
TAX TIPS
link
/www.savignano-cpa.com
