Many of us have just filed our 2015 federal income tax returns and are ready to file away our tax records. I’m not among this group, as I filed for an extension; but that only postpones the inevitable.
Like many folks, I retain everything I think might possibly help me in preparing my return so that I will have all the documents I need at hand when I actually get around to organizing them in preparation for filing my return. But once the ordeal of tax filing is over, how many of these documents do I need to keep – and for how long?
Here are some suggestions from IRS about how long we should retain our financial records:
- If any of the following records supports items (e.g., deductions, credits, etc.), you should keep them for at least three years. Three years is the general statute of limitations on the IRS’ being able to audit an individual return unless there is negligence or fraud. The statute of limitations on negligence is seven years and there is no statute of limitations on fraud.
- Credit card and other receipts
- Mileage logs
- Canceled checks or other proofs of payment
- Receipts for charitable contributions (if you itemize deductions)
- Any other records that support items on your federal income tax return
- This does not mean that you have to hang on to every bill you have received; only those that support items you may have claimed on your tax return.
Keep records regarding property (real or financial) until at least three years after you sell or dispose of the property. Some examples are:
- A home purchase, permanent improvement, or any other item that would go towards calculating the home’s basis
- Purchase or sale of stocks or other investments
- IRA transactions
- Records that support any depreciation, deductions or anything else on rental property
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