For an individual tax return, you must save everything that supports the numbers you entered on your return. You must keep the W-2 and 1099 forms you receive from employers, for example, as well as all 1099-B or 1099-INT tax documents from banks, brokers and other investment companies. “If it`s feasible, scan the documents, save them and save them,” Chambers says. “Dispose of the paper copy at will, as long as it is not an original deed, a security, a valuation or an original investment document. Keep these (electronic) documents secure. If you sold a home, you`ll need records that prove what you paid and what you got from the sale. And if you`ve sold a rental property, you`ll need detailed records of how much you`ve invested in the property over the years, as well as how much you`ve deducted for depreciation. It is advisable to keep Schedule E, the form you fill out each year for rental income, as long as you own the property. While CPAs are also required to retain tax documents for three years, “it`s ultimately the taxpayers` responsibility to ensure that tax forms and documents are available when requested by the IRS,” Curtis says. “Taxpayers should really think of copies kept with their CPA as backups.” If you`re like many Americans, you might have tax returns from ten years ago in your filing cabinet. But you don`t need to keep tax records for as long as you might think. Keep in mind that you need to know what you paid for the property, including commissions and other acquisition costs. In this way, you can correctly determine all the profits when selling.

If you don`t, you may have to pay more taxes than would otherwise be owed. Keep in mind that if the IRS disputes your return, it`s up to you to prove your tax base. If you received property as part of a tax-free exchange, your base in that property is the same as the basis of the property you gave up, plus the money you paid. You must keep records of the old property as well as the new property until the statute of limitations expires for the year in which you own the new property. Gather all documents confirming the money you received in the past year. Whether you hire a professional or do it yourself, you will need certain information and documents to file your tax return. Here`s a checklist for preparing the tax returns most taxpayers need to get the job done. If you sell a property at a profit, you have to pay capital gains tax on that profit. Calculating your capital gain often requires you to stick to your records for as long as you hold your investment.

You will need these records to calculate the cost base of the property, which is the actual cost adjusted upwards or downwards by other factors, such as major structural improvements. The IRS also keeps records of your tax returns from previous years. You can request a transcript online, by phone, or by mail (the IRS will ask for proof of identity, including your Social Security number). In fact, there are certain documents you want (and should) keep indefinitely. A practice of keeping the papers you need for the future will pay off later in terms of tax savings. Here`s an overview of these documents and why you should keep them. Just like home improvement enthusiasts, you want to keep records of other properties, such as inventory, your vacation home, rental property, or artwork. If you properly document the taxes you`ve already paid, you won`t be able to pay too much. There are a few exceptions — keeping records for worthless stocks or bad debts for seven years, says Nell Curtis, an accounting professor at Milwaukee Area Technical College in Wisconsin.

Settling your account with the Internal Revenue Service each year doesn`t have to be a frantic search for the information you need to file your tax return. Knowing what documents you have on hand can help reduce production difficulties and perhaps your tax bill. The following questions should be applied to each document when deciding whether to keep or discard a document. “The biggest mistake is not organizing around what records to keep,” says Neal Stern, CPA, a member of the American Institute of CPAs` National CPA Financial Literacy Commission. “There are people who kind of believe that they should keep all their records, but they don`t think about what`s important that should be kept or how it should be kept or how it should be organized.” Tax identification numbers are mandatory items on your checklist. All taxpayers need the following to pay their taxes. The IRS recommends keeping tax returns and other tax documents for three years (or two years from the time you paid the tax, whichever is later). The IRS has a statute of limitations to conduct audits and is limited to three years. Many of these forms are not required each year to file tax returns. For example, you will only receive the investment forms you may need to file your tax returns if you have had distributions or other activities. Then there are the credits on the tax preparation checklist, which are the most valuable cousins of deductions: they offer dollar-for-dollar reductions on every tax you owe. But as with deductions, you need documents to request them.

Here are some popular tax credits: To minimize profits, maximize the base of the house. The base that starts with what you paid for the house can be increased through capital improvements such as an extension, new roof, appliances, underground pool, and landscaping. The longer you own the home, the more likely it is that the documents you need to prepare your tax returns will depend on your situation. To help you prepare for your tax deadline or file your own tax returns, we`ve created a checklist to help you know which forms to bring. Neat, complete and well-organized financial records speed up the process of filing your tax return and can prevent you from making mistakes. Maintaining an order appearance after you submit your return — rather than throwing it into a filing cabinet or shoebox — will be helpful if the Internal Revenue Service has questions about your form. Last year`s taxes, both your federal and, if applicable, state return. These are not essential, but they are good reminders of what you submitted last year and the documents you used.

There are important exceptions to the limitation period, and if your tax return includes one, you will need to keep your tax returns and records for more than three years. For example, the statute of limitations is six years if you have significantly underestimated your income. The threshold for a significant underestimation is 25% of your gross income. If you claim that your gross income was $50,000 and that it was actually $100,000, you have significantly underestimated your income. When using a CPA, don`t rely on your accountant to keep records for you. Taxpayers should also keep copies of tax returns and related documents themselves, Curtis says. Once you`ve filed your tax return, you probably don`t want to keep all the documents, including your W-2, 1099 and others. It`s probably fair to say that you don`t want to think about your taxes at all. But don`t throw them away once you`ve filed your tax return or clicked Submit on your electronic forms. Charitable donations. To make sure your generosity pays off when you file your taxes, keep your charitable donation receipts.

The IRS may deny your application if you do not have verification. When listing your deductions, keep receipts for them: credit cards and other receipts, invoices, mileage logs and cancelled cheques. If you bought or sold mutual fund stocks, stocks or other securities, you will need confirmation receipts (or brokerage statements) showing how much you paid for the investments and how much you received when you sold.