How long do I have to keep these boxes of paper?
The general recommendation is to keep tax records for 3 years from the date you filed your tax return. So for 2019 tax returns filed by July 15, 2020, the 3 year period expires on July 15, 2023. This is the timeframe that you have to amend a tax return or the IRS has to audit you. There are certain circumstances when the IRS can initiate an audit after the 3 year period, such as if a tax return was never filed, or if a fraudulent tax return was filed. In that case, the records should be retained forever.
Keep copies of your filed returns. They are helpful in preparing the next year or amended returns. Generally you must keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out. This includes W-2s, 1099s, receipts for charitable contributions, and any other deductions taken.
If you are a business owner, you must keep receipts for all expenses for 3 years as this is your potential audit window. Simply entering them into your accounting software or keeping the credit card statements is not enough support for an IRS audit. Common items you will want to have receipts for are travel, meals and entertainment, and detailed mileage logs. Records relating to property, such as purchasing land or a home (including receipts for significant improvements) should be kept for 3 years after the property is sold. The IRS does allow these documents to be scanned and saved electronically.
If you have questions about what information you need to keep, or want to understand what other considerations (as a business or individual) you should be aware of prior to your 2020 tax planning meeting, contact our experts. We’re happy to help!
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