As you prepare your current tax paperwork, it’s an opportunity to go through the piles of paper and files you’ve saved for years. Here’s some guidelines on what to keep. To start, we advise you to keep originals of all legal documents, loan satisfactions, and notarized documents indefinitely. Most of the rest can be scanned and saved digitally.
Income Tax Returns: Keep all federal and state income tax returns and the supporting documents for at least three years. If your returns were sent by certified mail, keep the certified receipt with the tax return.
Rental real estate or depreciable business property: Keep records of the property’s cost, the purchase date, costs of improvements, and the method used to calculate depreciation, and a schedule of all depreciation claimed on the property until you sell the property. After you’ve sold it, keep the statements with the corresponding tax return.
Wills and trusts: Retain all copies of wills and trusts, the revised documents can be used to show the progression of the changes that occurred if the will or trust is challenged.
Stock and Bond Records: Keep records of any stocks, mutual funds and bonds purchases for at least ten years. These will provide a date for the type of gain and establish the basis in an investment to compute the gain/loss when they are sold. Also keep records that show a return of capital dividends and a complete back-up of dividend reinvestment plans additions which establish your basis in those shares.
Gifts or inherited assets: Keep all records showing your basis of inherited assets, or assets received by a gift. They will be needed if you sell the assets, or you are involved in a marital separation or other legal division of property.
Partnership and Business Agreements: You should retain all partnership, members, or corporate organizational, buy/sell or cross purchase agreements as long as you have an interest in any business interest or entity. You should also retain all basis calculations.
Art, Jewelry and Collectibles: Keep all receipts of purchases and appraisal reports as long as you own the item. The receipts will substantiate cost basis when they are sold or if you make gifts of that property or you need to establish the loss for insurance purposes. Note that there are special rules for gifts to charities valued over $5,000 and you should consult with an accountant before making any such gifts.
Retirement Plans: If you have made nondeductible contributions to an IRA, 401k, 403b or employer retirement accounts, maintaining records of these contributions will facilitate proving, and reducing, the tax liability when funds are withdrawn. You should also retain back-up of Roth IRA conversions that were taxed. For this you can keep the tax return for the years the tax was paid. Also, retain all current plan documents and copies of all designation of beneficiary forms.
Keep records indefinitely if there is any fraud reported on your SS#.
If you have any questions about specific documents, ask your tax associate for direction on how long they should be retained.