Tax season can be a stressful time for many, and one of the biggest questions people often have is how long they should keep their tax information. It’s important to keep the necessary documentation for a certain amount of time in case of an audit or other inquiries from the IRS. In this guide, we will explore the different types of tax documents and how long they should be kept.
First, let’s start with the basics. Tax records consist of financial information used to prepare and file taxes. This can include W-2 and 1099 forms, receipts for deductions, and investment or retirement account statements. The IRS recommends keeping tax records for at least three years, but certain documents should be kept for longer periods.
If you are self-employed, it’s recommended to keep your tax records for at least six years. This is because the IRS has an extended period of time to audit self-employed individuals and small business owners. It’s important to keep track of all income and expenses related to your business, as well as any receipts for expenses, including office supplies, travel, and other business-related costs.
Retirement accounts are another type of tax document that should be kept for a longer period of time. Documents such as 401(k) and IRA account statements should be kept until all funds have been withdrawn or rolled over into another account. This is because the IRS can request these documents in case of an audit.
Real estate and investment property records should also be kept for an extended period. These records include closing statements, purchase agreements, and any receipts for home improvement projects or repairs done on the property. Homeowners should keep these records until they sell the property, while investment property owners should keep them until the property is sold and all tax documents related to the sale have been filed.
Medical expense records should be kept for at least three years. This includes receipts for co-pays and any other expenses related to medical visits. It’s important to keep records of medical expenses in case you need to deduct them on your taxes.
In conclusion, it’s recommended to keep tax records for at least three years, but certain documents should be kept for longer periods. Self-employed individuals and small business owners should keep records for at least six years, while retirement account and investment property records should be kept until all funds have been withdrawn or the property has been sold. Keeping accurate and organized tax records can help ease the stress of tax season and ensure that all necessary documentation is available in case of an audit.
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