What to save/keep for TAXES
If you care about saving the right stuff and NOT the excessive paper, read on! Here are some tips from Kiplinger magazine I found on line. I edited it so it was digestible. It looks like the images are failing me, I hope they come through... Enjoy!
This is a great time of the year to
get rid of outdated files and to organize your records in preparation for
filing your tax return in the spring. You should be receiving your year-end mutual fund and
brokerage statements by the end of January, along with W-2 and 1099 tax forms
reporting your income and interest for 2010.
Review your year-end statements to
make sure they accurately reflect the monthly statements you received from your
bank, broker and other
financial institutions. Then you can toss the monthly statements. Keep those year-end statements
in your tax files for at least three years after the due date of your return (or six years if you’re
self-employed).
Keep: Monthly statements until the end of the year
Toss: Monthly statements AFTER you reconcile with your year-end
statements
Keep: Year-end statements in your tax file for three years*
*If self employed, six years
You should keep records of your stock and fund
purchases for as long as you hold those investments, however. You’ll
need to report the date,
number of shares and price paid on Schedule D to establish your basis
when you finally sell a stock or fund. You’ll only pay tax on the profits above
the basis amount, or you can use a loss to offset investment gains and up to
$3,000 per year of ordinary income. Also, hold on to year-end statements that show reinvested dividends and
capital-gains distributions, so you don’t end up paying taxes on the same money
twice when you sell the shares. See The Most-Overlooked Tax Deductions for more information about reinvested dividends and other
frequently missed tax breaks.
It’s also a great time to de-clutter
the rest of your financial files. Although it’s recommended that you keep your tax returns for at
least six years, you may want to hold on to them forever (or at least a digital archive
of them), because they can provide clues about your income and investments and
other tax information that might come in handy in the distant future. You can
still weed out and toss
supporting documents, such as canceled checks and old receipts, three years
after the due date of your return (that’s usually how long the IRS has
to audit your return, unless you’ve significantly underreported your income).
If you have any self-employment
income, keep your receipts for at least six years.
- Keep: Tax returns for six years (digital archive forever)
- Toss: Supporting documents – canceled checks, receipts – after three years *
*If
self-employed, six years
You may also want to hang on to receipts for major home improvements for at least three years after you sell your house. They may come in handy if you want to show potential buyers how much you’ve spent to upgrade the property, and you may be able to use certain home-improvement expenses to lower any tax bill you might have on your home-sale profits. You probably won’t pay taxes on the sale of your principal residence unless you’ve lived in it for less than two years, you rented out part of it, or your profit on the sale exceeded $250,000 if you’re single, $500,000 if you’re married.
·
Toss: Your ATM receipts and bank-deposit slips as
soon as you match them up with your monthly statement.
·
Toss:
Paper copies of your credit-card,
utility, phone and cable bills as soon as the next month’s bill acknowledging
your last payment arrives (unless you need to keep the bills for tax purposes
-- if you deduct home-office expenses, for example).
· Keep:
Receipts for major home improvements for three years AFTER you sell the
property.
Keep: Pay stubs UNTIL you receive your W-2 for the
year.
·
Keep:
You may also want to hold on to your utility receipts if you plan to sell your
house soon, so you can show prospective buyers how much your utilities tend to
cost.
Any year that you make a nondeductible contributions to a traditional IRA,
you must file Form 8606 to document those contributions. Then hold on to all of
those 8606 forms until you withdraw all the money from your IRA, so you won’t
end up overpaying your tax bill when you start to take out the money in
retirement (see Deductible
vs. Nondeductible IRA Contributions for more information).And when you do decide to toss any of these papers, be sure to shred them so your garbage doesn’t become a treasure trove for identity thieves.
For more information about filing your 2010 taxes, see our Tax Tips column.
Source: Kiplinger.com/article/taxes (search: how long to keep tax records)
posted by Liz Canavan @ 12:17 PM
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