What Tax Records Should You Keep?
As you go through your documents to preparation for your 2017 tax filing, you may be wondering what you should keep and what you should toss. Here are some tips to keep in mind.
* Keep any records that support income and expense items on your tax return. For example: Forms W-2s, 1099s, K-1s, and records of any other income you have received throughout the year. You should also save banks and investments statements from brokers, as well as receipts for donations or items used for your job.
* You can be audited by the IRS within 3 years after a return is filed. However, in the case of underreported income, the IRS can audit up to 6 years. So, to be safe, keep your tax returns for 7 years.
* Certain records should be retained for an even longer period of time. This would include records and receipts that relate to the purchase of your home as well as any improvements that you make. You should also keep records of major gifts that you make or receive, dividend reinvestments, and investment purchases.
* Another good reason to keep copies of all your tax records and W-2s would be if you ever need to prove your earnings for Social Security purposes.