A frequent question we get throughout the year is: How long should I keep records and tax returns?

Here is a helpful guide to follow:

1 Year
Monthly statements of investments until an annual statement recapping the year’s activity is available, bank statements, copies of checks used for tax deductible expenses and payroll statements until your W-2 arrives and you confirm the information matches. 
3 Years
Federal and state income tax returns and receipts and records relating to those returns.

4 Years
Keep all employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

6 Years
Tax returns for years with unusual activity or transactions, like the sale of real estate or significant donations, or unusual income amounts.

Indefinitely
Mortgage notes and real estate settlement statements, along with receipts for any improvements to your home so you can calculate the basis value of your property when you sell the home.

Records Connected to Assets
Keep records relating to property until the period of limitation expires for the year in which you dispose of the property in a taxable disposition.  It is important to hold on to these records to determine depreciation, amortization and/or depletion deduction and to figure the gain or loss when you sell or otherwise dispose of the property.

Other Considerations
Even when your records are no longer needed for tax purposes, do not discard them until you check to confirm you do not need to keep them longer for other purposes such as insurance company or creditors.

Have a question? Contact Paul Mueller.

Your comments are always welcome!