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Record Retention

We are only a couple of weeks away before tax season culminates. I know some of you may filed an extension but if you haven’t you’re probably asking the same questions I hear often....

What records do I need to keep? & How long do I need to keep records?

Here are some helpful hints to start you moving forward in the right direction.

1.  Keep your supporting documents with your tax return. Don’t separate out the paper in many places. This will make it easier when you’re ready to shred past years.

2. Decide what’s enough for you. Your W2 will show your income for the year. Do you have to keep your pay stubs too? Some people don’t. They feel comfortable just keeping the W2. You decide for yourself. The same principle goes for your mortgage statements and your investment statements. If you are okay with only keeping the year end statements (which summarizes all the monthly statements) then do just that. I find each customer has their own comfort level when it comes to these decisions.

3. Always ask, does the IRS care? The only things the IRS really cares about is income made and legitimate tax deductions. A good example of this is your expired car insurance statements and Comcast cable bills. Those are not income made or legitimate tax deductions so why keep them?

4. Bank statements. Everyone always asks about them. Bank statements do reflect a lot of spending. They reflect income coming in and expenses (some which maybe be deductible) going out. I recommend keeping them. I always do unless there’s no activity recorded on them at all. Statements back up your income record and your donations records if you give to chairities through your checking account.

5. Credit Card statements. Here’s another not so obvious decision people ask about. Credit cards never show taxable income. Again, the question to ask would be are their deductible expenses on my credit card statements. If not, shred them. Macy’s or Kohls credit cards or BP gas cards are of no interest to the IRS. They don’t care if you bought 10 sweaters.

6. When in doubt, make a quick call. There are plenty of accountants in your neighborhood that would be happy to point you in the right direction. Or better yet, ask your closest HR Block. They are the tax gurus and should have plenty of resources on hand to answer your questions.

7. Finally, how long to keep records? Believe it or not most people stick with the magic number 7-years that is. Better to be safe than sorry.

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