Record Retention

What do I need to keep for tax records & how long?

Unfortunately there is no perfect rule for how long to keep tax records and what to keep. Your life situation or the type of business you run determines what you need to keep and for how long. Many tax professional, accountants and books all disagree and recommend different things. A basic rule of thumb most people are comfortable with is keeping tax papers for 7 years. I’d say you’d be safe somewhere between 5-7 years. Some people are more apt or ok to tossing papers than others. Holding paper past 7 years isn’t necessary unless you’ve been told otherwise by a trusted authority. 

The key word though to remember while tossing or shredding paper is "tax” paper. Don’t keep all papers for 7 years. Just those that SUPPORT your tax return- that includes any paper that shows your income or deductible expenses . Deductible expenses can vary from situation to situation, so chatting with your tax professional over the phone for a few minutes my clarify things to help you in your specific situation like: a death in the family, divorce, running a business from home, and major medical expenses.  If you aren’t in a unique situation you’ll be able to shred or toss most of your paper. On http://www.irs.gov/,, Publication 552 answers many questions regarding record keeping. Here’s the direct link.  http://www.irs.gov/publications/p552/ar02.html

Suzie Orman also writes a simple, easy to read webpage on Record Keeping