Tax Corner: All about keeping records for tax purposes – What you can’t do!

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By Neil Seidler, CPA, CMA

Question:  How long do I need to keep my tax records for? Can I dispose of them once my current year return is processed?

Answer:  (1) It depends; and (2) NO, absolutely not!!

It is the responsibility and obligation of the taxpayer to keep accurate and detailed records to document the income, expenses, gains, losses and deductions that you have reported on your tax return, and to know the basis or adjusted basis (the cost) of your home, assets and investments.

The IRS provides many guides, instructions and publications for keeping records. These highlights are extracted from those publications.

These records to maintain include your purchase contract and settlement papers for property and investments that you have purchased, or other objective evidence if you acquired assets by gift, inheritance or similar means. You should keep any receipts, canceled checks and similar evidence for improvements to property or other additions to investments and assets.

How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. You must keep your records for as long as they are important for meeting any provision of the federal tax law. Keep records that support an item of income, a deduction, or a credit appearing on a return until the period of limitations for the return runs out. (A period of limitations is the period of time after which no legal action can be brought.)  For assessment of tax you owe, this is generally 3 years from the date you filed the return. For filing a claim for credit or refund, this is generally 3 years from the date you filed the original return, or 2 years from the date you paid the tax, whichever is later.

You may need to keep records relating to the basis (cost) of property and investments for longer than the period of limitations. Keep those records as long as they are important in figuring the basis of the original or replacement property. Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you.

The IRS offers many publications and information pages on keeping records. Just go to www.IRS.gov and search “Keeping Records”.

Two publications on this subject that are worth reading are:

Publication 530, Tax Information for Homeowners

Publication 583, Starting a Business and Keeping Records

We welcome your questions and inquiries. If you have tax-related questions, or any other questions that we may be able to address, please email us or comment below and we’ll try to answer them in a future article. You can email me at TheRVTaxGuy@gmail.com .

The material presented here is for informational purposes only and is not intended to
provide, and should not be relied on for tax, accounting or legal advice. Readers should
consult their own tax, accounting and legal advisors to discuss their own personal
matters.

Neil Seidler, CPA, CMA, has served businesses and individuals across the USA and Canada for 35 years. As an avid RVer and recent full-timer he has a unique perspective on RV tax issues.

Read Neil’s previous posts here.

##RVT935

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rvgrandma
7 months ago

I have all our tax returns from our first year of marriage in 1971 to now. Just can’t throw them away. Love to look at little we lived over the years, who much we paid for new cars, houses, etc.