Thursday, August 13, 2015

Saving Documents

Do I REALLY need this??
As we are closing in on the last few weeks of summer break I know a lot have begun the final push to get the house cleaned and decluttered.  Some things that usually take up the most space are all of those pesky tax documents that we have been told to hold on to FOREVER.  In reality most documents can be discarded after only a few years, freeing up more space for everything we NEED.  You know like all of those boxes of craft supplies, toys your kids couldn’t possibly part with or those jeans you will one day squeeze back in to. 

Period of Limitations that apply to income tax returns
The length of time you should keep a document depends on the action, expense, or event which the document records. Generally, you must keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out.
The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax.

For personal taxes you should hold onto all supporting documents for 3 years.  If however you have underreported income, you should then hold onto documents for 6 years. 
Are the records connected to property?
Generally, keep records relating to property until the period of limitations expires for the year in which you dispose of the property. You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure the gain or loss when you sell or otherwise dispose of the property.

Note: Always keep copies of your filed tax returns. They help in preparing future tax returns and making computations if you file an amended return.