Do you have an overflowing file cabinet?  Are you unsure of what to keep and what to dispose of when it comes to tax information?  Work through the clutter with this quick guide.
Expenses – Charitable donation acknowledgements, receipts for employee business expenses, and automobile mileage logs are all needed for verification of deductions.  You will need to keep these for at least seven years after you file the return in which they were claimed.
Income – Other common tax forms such as 1099s showing interest, dividends, and capital gains from banks or brokerages follow the same seven year rule as do Schedule K-1s from S corporations and partnerships.  It is recommended by the IRS that until you begin collecting social security you should continue to keep all W-2’s on file.
Tip: Once you’ve compared totals to annual forms you may shred interim income reports.
Retirement accounts – Keep records detailing your contributions until you’ve recovered your basis as you may have to calculate the taxable portion of distributions.
Tax returns – If underreported income is involved the statute of limitations is typically three years but can be six.  The IRS has an indefinite time period for assessing additional tax in cases of fraud or when no return has been filed.
Generally, keeping federal and state returns a minimum of seven years is a good idea.
Contact our office for additional information, including how long you should store business papers and payroll reports.  Together we can establish a records retentions schedule, we’ll be happy to help.