What Records Should You Keep for Taxes?

December 30th, 2010 BY Claire Moore

Basic Records for Taxes

money-256288_640Basic records are documents that everybody should keep. These are the records that prove your income and expenses. If you own a home or investments, your basic records should contain documents related to those items. Here is a list of documents you should keep as basic records.

FOR items concerning your income keep

  • Form(s) W-2
  • Form(s) 1099
  • Bank statements
  • Brokerage statements
  • Form(s) K-1

For expenses keep the following

  • Sales slips
  • Invoices
  • Receipts
  • Canceled checks or other proof of payment

If you own your home then it’s important to save certain items as long as you own the home and for three- to seven years after you report the sale of the home on your tax return

  • Closing statements
  • Purchase and sales invoices
  • Proof of payment
  • Insurance records

Investments You may own your investments for years. Be sure to keep all paperwork that shows how much you paid for your investments so that you can accurately determine the cost basis upon sale. Also retain records for three to seven years after you report the sale on your tax return.

  • Brokerage statements
  • Mutual fund statements
  • Form(s) 1099
  • Form(s) 2439

Income. Your basic records prove the amounts you report as income on your tax return. Your income may include wages, dividends, interest, and partnership or S corporation distributions. Your records also can prove that certain amounts are not taxable, such as tax-exempt interest.

Note:If you receive a Form W-2, keep Copy C until you begin receiving social security benefits. This will help protect your benefits in case there is a question about your work record or earnings in a particular year. Review the information shown on your annual (for workers over age 25) Social Security Statement.

Investments. Your basic records should enable you to determine your basis in an investment and whether you have a gain or loss when you sell it. Investments include stocks, bonds, and mutual funds. Your records should show the purchase price, sales price, and commissions. They may also show any reinvested dividends, stock splits and dividends, load charges, and original issue discount (OID).

Alimony If you receive or pay alimony, you should keep a copy of your written separation agreement or the divorce, separate maintenance, or support decree. If you pay alimony, you will also need to know your former spouse’s social security number.

Business Use of Your Home You may be able to deduct certain expenses connected with the business use of your home. You should keep records that show the part of your home that you use for business and the expenses related to that use.

Child Care Credit You must give the name, address, and taxpayer identification number for all persons or organizations that provide care for your child or dependent. You can use Form W-10, Dependent Care Provider’s Identification and Certification, or various other sources to get the information from the care provider. Keep this information with your tax records.

The kinds of records you must keep for charitable contributions depend on the amount of the contribution and whether the contribution is in cash.

Contributions from which you benefit. Generally, if you make a charitable contribution that is more than $75 and is partly for goods or services, the organization must give you a written statement that you should keep.

Gambling Winnings and Losses You must keep an accurate diary of your winnings and losses that includes the:

  • Date and type of gambling activity
  • Name and address or location of the gambling establishment
  • Names of other persons present with you at the gambling establishment
  • Amount you won or lost

Individual Retirement Arrangements (IRAs)
Keep copies of the following forms and records until all distributions are made from your IRA(s).

  • Form 5498, IRA Contribution Information, or similar statement received for each year showing contributions you made, distributions you received, and the value of your IRA(s).
  • Form 1099-R, Distribution From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., received for each year you received a distribution.
  • Form 8606, Nondeductible IRAs, for each year you made a nondeductible contribution to your IRA or received distributions from an IRA if you ever made nondeductible contributions.
  • Property Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. You must keep these records to figure your basis for computing gain or loss when you sell or otherwise dispose of the property.

    Keeping records for nontax purposes. When your records are no longer needed for tax purposes, do not discard them until you check to see if they should be kept longer for other purposes. Your insurance company or creditors may require you to keep certain records longer than the IRS does.

    Always consult with a professional tax preparer to find out what is the best course of action for your particular circumstances.

    What Records Should You Keep for Taxes? / Small Business Bookkeeping Network by is licensed under a

    Categories: For Bookkeepers, For Business Owners, Personal Finance

    Leave a Comment

    What Records Should You Keep for Taxes? / Small Business Bookkeeping Network by is licensed under a