A Fairfax, VA tax attorney speaks about the importance of maintaining records after you’ve filed your income taxes with the IRS.
From a tax attorney’s standpoint, the only thing worse for his or her client than being audited by the Internal Revenue Service is being unable to produce sufficient documentation for an IRS auditor. While no one wants to hoard voluminous files of paper, whether you’re an individual or a business, it’s important to keep certain tax documents for a reasonable period of time. The tricky part for many Virginia taxpayers is determining what the IRS considers reasonable.
Guideline For Document Retention
The following guidelines were gleaned from the IRS Publication 522. Among other things, it discusses the IRS’s expectation with regard to paperwork retention.
With some notable exceptions, tax records should be maintained for a period of three years from the date of filing (as opposed to the calendar year end). That means if you filed your 2011 returns on April 15, 2012, you should retain your records at least until April 15, 2015. Documents that you should keep for a period of at least three years are bills; credit card and other receipts; invoices; mileage logs; canceled, imaged, or substitute checks; proofs of payment; and any other records to support deductions or credits you claim on your return.
Some documents should be kept for a longer period of time. These include things like proof of a home purchase or sale, stock transaction statements, individual retirement account (IRA) statements, proof of monthly payments on a business or rental property, et cetera.
The Internal Revenue Service does not require you to retain records for any specific period of time. However, Publication 533 does state, “You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code.” If you are unsure as to whether or not a period of limitations for a specific item has run out, you should consult your Virginia tax attorney or accountant.
Use Caution When Discarding Documents
When it comes to the retention of tax records it is always best to err on the side of caution. In most cases, auditors are looking to determine whether or not you’ve written off something that you shouldn’t have, or possibly exaggerated the amount of a deduction or credit. With this in mind, documents that were used to justify a tax deduction or credit on a tax return are of particular interest to IRS auditors. However, any document that impacted your taxes could potentially be requested.
For more information on income tax record retention and other matter related to the payment of income taxes, refer to IRS Publication 522 or consult a qualified, Virginia tax attorney for legal advice.
