HOW LONG SHOULD I KEEP TAX RECORDS?

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Now that you have completed your taxreturn – how long should you keep the return, and the records and documentationthat support items claimed on the return? (1)  Keep the paper copy of your tax returns (Form1040 or 1040A plus all supporting Schedules and Forms) forever.  This provides a permanent record of yourfinancial history.  You never know whenthe information on a prior year’s tax return will come in handy for a varietyof tax or financial related reasons, or just to satisfy personal curiosity. (2)  Keep all back-up documentation that supportsan item reported or deducted on your tax return for four (4) full years.  This includes all applicable bank statementsand cancelled checks as well as W-2s, 1099s, 1098s, and appropriate receiptsand bills.  You can toss all suchinformation for your 2011 tax return in December of 2015. The IRS, and the appropriate statetax authorities, has three (3) years from the due date (or filing date if youhad any extensions) of a tax return to audit and revise that return (except inthe case of tax fraud – then the IRS can go back forever).  If you filed your 2011 Form 1040 by theinitial April 15, 2012 due date, “Uncle Sam” had until April 17, 2015 to auditit.   (3)  Keep all confirms for the purchaseof stock, bonds and mutual funds, and other appropriate back-up (such asnotices of splits and records of any dividend reinvestments) for as long as youhold the investment plus four (4) additional years.  Keep the confirmation slip or otherdocumentation for the sale or disposition of the investment for four (4) yearsafter the sale or disposition.   Similarly, keep all Closing orSettlement Statements for the purchase and refinancing of real estate, anddocumentation of any capital improvements, for as long as you own the propertyplus four (4) additional years.  Keep theClosing or Settlement Statement or other documentation for the sale ordisposition of the property for four (4) years after the sale or disposition. And if you have invested in alimited partnership or “sub-chapter S” corporation, or are a partner in a businessorganized as a partnership, a “sub-chapter S” corporation or an LLC or LLP youshould keep the annual Form K-1 you receive from the investment or business foras long as you own an interest in the entity plus four (4) additional years,and keep any paperwork related to the sale or disposition of your interest forfour (4) years after the sale or disposition. TTFN