Wednesday, July 28, 2010

How Long is Long Enough: Key Tips to Storing Income Tax Records

We all want to be safe, and nobody likes taking chances with the IRS. So how long should we save documents like income tax records and other relating materials? One of Matthew Mullhofer's clients wondered the same thing as he made his way in to the office for his 3 o'clock appointment.

He wanted to be prepared for anything, while at the same time, feared his files would start to overflow with the number of papers he was stuffing in to them. Matthew Mullhofer sat him down, and promptly started explaining...

At minimum, federal income-tax returns should be saved 3 years from the date the return was originally due; once again, this is at MINIMUM. To be SAFE, it is advised to save federal returns for at least 6 or 7 years. The reason for this being if you failed to report income that you should have reported and if its more than 25% of the gross income shown on your return, then "the period of limitations does not run out until six years after you filed the return," so says the IRS.

However, These same rules DO NOT apply if you file a return that is "false or fraudulent." In this case, the IRS can take action generally at any time.

When it comes to records showing how much you paid for stocks, bonds, mutual funds, real estate and other types of property that you bought and still own, it would be considered wise to hold on to these for very long periods of time. also to check if your state tax department has any special record keeping rules. Some states require you to hang on to old documents for longer than you would imagine, these are all based on IRS rules.

Matthew Mullhofer had one final piece of advise pertaining to the client's w-2 form (showing wages and other compensations). The client was advised to keep copy "C" until he began receiving social security benefits. This is in order to protect benefits in case there is a question about work records or earnings in a particular year.

Attorney Matthew C. Mullhofer can be reached toll free at (877) 246-2770

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