Cook Wealth Management Group

Save Your Tax Records – If Not For Audit, For Peace of Mind

Ever wonder if you’re wasting space by holding on to all those tax records?

You’re not.

The IRS could demand to see those records up to three years after you filed the tax return in question. (And you’re not entirely safe after three years. If you’re ever suspected of fraud, the IRS may ask for even older records.)

How Long To Hold On

Keep your tax records and keep them accessible for at least three years.

As for tax returns, they contain a variety of information about you; your return is a one-stop shop for your financial history. Property, medical issues, tuition – all this and more is recorded in one place. Some tax analysts suggest storing your returns forever. And with the ease of electronic storage, why wouldn’t you?

Safe Space

A locked fireproof safe is an option, albeit a spacious and expensive one. You may be concerned about housing such valuable documents, and you should be, as identity theft is a serious threat to all of us.

The IRS allows electronic storage as long as the records are complete and available to them. Scanning is a great way to consolidate space, and Adobe now offers password-protection, allowing you to save your records as pdfs and keep them private.

Remember to always back up your files on an external disk – like a CD or thumb drive – and store in a safe place, such as a safety deposit box. Also consider saving your online bank statements to disk, since many companies charge a fee for providing statements dated earlier than 18 months prior.

Organize Now for Later

Even if it’s not like you to keep things in order, try to do so when it comes to your taxes. Here are a few tips to get you started:

  • For easy retrieval, keep an individual file of all your donations instead of tossing them in with the rest of your current year tax information.
  • Don’t count on charities to send acknowledgments – maintain your own proof of each contribution in case the charitable organization doesn’t.
  • If you own a business, simplify your tax filing by using a separate checking account and credit card for business expenses so there’s no need to split your expenses line by line.
  • Keep documentation related to depreciating work equipment separate, and maintain the file for at least seven years, or as long as the equipment is in use.
  • Save your receipts for business purchases; your statement doesn’t specify the actual product – only the name of the store and the amount – so it’s not enough proof for your deduction.

 

Cook Wealth retains client tax records for at least three years in case of audit, and we store electronic records on a secure server indefinitely. Our financial planning clients also have access to a personal online vault, wherein clients can access personal documents online – including trust agreements, passports, and tax returns – at any time.*

If you have questions regarding tax records storage, please email us at info@cookwealth.com. For more information from the IRS about recordkeeping, see Publication 552.


*from anywhere with a secure internet connection
Content derived from “After tax season comes the question: Save it or shred it?” by Sandra Block. USA Today.  April 20, 2010.
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