Seid & Company - Certified Public Accountants
  • linkedin
  • facebook
  • linkedin
  • facebook
  • Home
  • About
  • Services
  • Tuesday Tax Tips
  • Contact Us

How long should I keep my tax records?

00February 22, 2011 Posted by Mark Seid in Tuesday Tax Tips

The general rule for maintaining tax records is that they should be retained for as long as they may be material for any tax purpose. The general rule is pretty vague. So, below are some specific guidelines.

Do you want a handy records retention guide? Go to www.seidandco.com and scroll down to the bottom the home page. Click on “HOW LONG SHOULD I KEEP MY TAX RECORDS?” We have printed copies available in our office.

Before we go into the details, let’s look at how you maintain your records. Gone are the days of rooms full of file cabinets and garages with boxes stacked floor to ceiling. Today we can keep records electronically – scanned images of documents and documents that are in electronic format originally.

The method used to maintain your records is probably more important than the decision of which records to keep. Here’s a great general rule: Keep all of your records in a digital format. Literally millions of pieces of paper can be maintained on a flash drive that will neatly fit on your keychain (or more appropriately in your safety deposit box).

Why am I keeping These Records?

The reason we keep tax records each year is to be able to prepare our income tax returns. It’s not just to make our accountant’s life easier at tax time, the rules for maintaining records is part of the Internal Revenue Code (IRC). IRC Section 6001 and the corresponding Treasury Regulations require taxpayers to “keep accurate, permanent books and records so as to be able to determine the various types of income, gains, losses, costs, expenses, and other amounts that affect their income tax liability for the year.”

Statute of Limitations

The length of time to maintain tax records depends on the statute of limitations for assessment of additional tax. For most people the federal statute of limitations is three (3) years after a tax return is filed. In California the statute of limitations is four (4) years. There are some special situations where the statute of limitations can be extended further: Four (4) years when making a determination of whether an activity is engaged in for profit; Six (6) years when at least 25% of your income was omitted from your tax return; seven (7) years for certain bad debts; and forever in the cases of failure to file a tax return or fraud.

Keep These Tax Records Indefinitely

Now let’s start with the tax records that individuals should never throw away. Individuals should keep copies of their federal and state income tax returns indefinitely. Even the paper copies of tax returns over a lifetime will probably not fill up more than a box or two. Tax returns contain substantial information about transactions that have occurred in the past that may be needed to calculate the tax effect of future transactions. Along with your income tax returns, hold onto any estate tax returns from family members where you received an inheritance. Gift tax returns fit into the same category – they will be needed by your heirs when preparing your estate tax return.

For businesses the list of items to never throw away includes business entity formation documents, corporate minutes & retirement plan records, tax returns (income, payroll, and excise) and financial statements.

Keep These Records for Five Years

Hold onto transaction type records for five years past the date the of the tax year in which the transaction occurred. Transaction type records are invoices, checks, deposit slips, purchase documents, sales records, paid bills, accounts receivable and accounts payable ledgers, bank statements and reconciliations.

For example, if you paid your real estate taxes on your home in 2011 keep the notice from the county assessor’s office and your cancelled check or other proof of payment until 2016.

Capital Assets

For certain assets you should keep the records pertaining to the cost of acquisition of the asset for five (5) years after the date of its disposition. Capital assets include stock, bond and mutual fund investments, other investments, real estate (including your personal residence), artwork or other collectibles, precious metals held for investment purposes, and vehicles.

If you need more information on how long to keep specific records, ask one of the tax professionals at Seid & Company, CPAs.

C.O.D. means Cancellation of Debt →← A Time for Giving

Like this post?

0
Tweet
More sharing options

About the author

mark-seid
Mark Seid (Mark Seid)

More posts

  • Popular
  • Latest
Are Legal Expenses Deductible?
Are Legal Expenses Deductible?
Tax Cuts and Jobs Act – 2017 Tax Reform
Tax Cuts and Jobs Act – 2017 Tax Reform
How to Make Every Purchase Less Than $500 (or $2,500) an Expense
How to Make Every Purchase Less Than $500 (or $2,500) an Expense
Mark F. Seid
Mark F. Seid
Paycheck Protection Program Loans
Paycheck Protection Program Loans
COVID-19: April 15 Tax Deadline Extended
COVID-19: April 15 Tax Deadline Extended
IRS Extends Payment but Not Filing
IRS Extends Payment but Not Filing
Tax Cuts and Jobs Act – 2017 Tax Reform
Tax Cuts and Jobs Act – 2017 Tax Reform

Categories

  • Our Professionals
  • Tax Humor
  • Tuesday Tax Tips
  • Uncategorized

Recent Posts

  • Paycheck Protection Program Loans
  • COVID-19: April 15 Tax Deadline Extended
  • IRS Extends Payment but Not Filing
  • Tax Cuts and Jobs Act – 2017 Tax Reform
  • Year-End Tax Planning

Recent Comments

    Archives

    • April 2020
    • March 2020
    • December 2017
    • December 2016
    • December 2015
    • March 2014
    • February 2014
    • December 2013
    • October 2013
    • April 2013
    • March 2013
    • February 2013
    • January 2013
    • November 2012
    • July 2012
    • June 2012
    • May 2012
    • April 2012
    • March 2012
    • February 2012
    • September 2011
    • August 2011
    • July 2011
    • April 2011
    • March 2011
    • February 2011
    • January 2011
    • January 2010

    Meta

    • Log in
    • Entries RSS
    • Comments RSS
    • WordPress.org

    About Us

    We are a full service Certified Public Accountant firm, incorporated and registered with the California Board of Accountancy. We look forward to assisting you with all your tax needs, whether it be preparation of taxes, tax planning, or representation matters.

    Latest Blog Post

    • Paycheck Protection Program Loans
      Paycheck Protection Program Loans10 months ago

      As part of the CARES Act, the SBA is authorized to to make loans under a new Paycheck Protection Program…

    Our Address

    935 Riverside Ave, Suite 1
    Paso Robles, CA 93446
    --------------------------------
    Phone: 805-237-1040
    Email: info@seidandco.com
    Seid & Company © 2020 | All Rights Reserved
    • About
    • Services
    • Tuesday Tax Tips
    • Contact Us