tax-records-to-keep

One question that I seem to get asked quite frequently this time of year is how long you should keep financial records and old tax returns.

Generally, the IRS recommends keeping copies of tax returns and supporting documents at least three years. Some documents should be kept up to seven years in case you need to file an amended return or if questions arise. Keep records relating to real estate up to seven years after disposing of the property.

Health care information statements should be kept with other tax records. It is important to note that these forms do not get sent to the IRS as proof of health coverage, but you do need them when preparing your tax return.  The records that you should keep include records of any employer-provided coverage, premiums paid, advance payments of the premium tax credit received and type of coverage. You should keep these, as you do other tax records, for three years after you file your tax return.

Whether you store your records on paper or keep them electronically, the IRS urges taxpayers to keep tax records safe and secure, especially any documents bearing Social Security numbers. I also recommend scanning paper tax and financial records into a format that can be encrypted and stored securely on a flash drive, CD or DVD with photos or videos of valuables.

Now is a good time to set up a system to keep tax records safe and easy to find when filing next year, applying for a home loan or financial aid. Tax records must support the income, deductions and credits claimed on returns. You also need to keep these records if the IRS asks questions about a tax return or to file an amended return.

Another important point is that you should have a copy of your prior year return, as the IRS makes changes to authenticate and protect taxpayer identity. Beginning in 2017, some taxpayers who e-file will need to enter either the prior-year Adjusted Gross Income or the prior-year self-select PIN and date of birth. If filing jointly, both taxpayers’ identities must be authenticated with this information.

If you need tax information from your prior year return, you can request a free transcript for the past three tax years. Your tax transcript can be accessed via the IRS website, www.irs.gov, and click on The ‘Get Transcript’ tool.

If you are still keeping old tax returns and receipts stuffed in a shoebox in the back of the closet, now is a good time to rethink that approach. Make sure tax, financial and health records are safe and secure whether stored on paper or kept electronically. When records are no longer needed for tax purposes, ensure the data is properly destroyed to prevent the information from being used by identity thieves.

If disposing of an old computer, tablet, mobile phone or back-up hard drive, keep in mind it includes files and personal data. Make sure you are taking the necessary steps to remove all personal information.

If you have any questions about record keeping, or would like to learn more about our services, please feel free to contact us at our New England tax services office to schedule an appointment at (855) 479-2400.

You’re Going to Wish You Called Us Sooner!