Get Rid of the Clutter Knowing Which Tax Documents to Keep
The amount of paperwork and receipts required to prepare taxes can be overwhelming. By knowing what to keep and for how long, you can get rid of unnecessary documents.
The IRS has up to three years to initiate an audit, so you will need to maintain tax filings for at least that time. This includes Forms W-2, Forms 1099, proof of dividends, capital gains distributions, charitable donation receipts, bank statements, and records showing other deductions and credits.
Keep tax records for at least six years if you are self-employed or small business owner. This is because the IRS has up to six years to vet you unless you report at least 25% of your income.
Items to keep after three or six years include your actual tax return, home improvement project records, reinvested dividend accounting, and records showing details of stock and mutual fund purchases in taxable accounts.
New for tax year 2014, you also need proof of minimum health insurance coverage or a qualified exemption certificate.
Also, consider scanning these documents and saving them digitally if you are not interested in storing reams of paper in folders.
Don’t Throw Out These Tax Reports | Kiplinger
Photo by Joel Beza .