Today TaxMama hears from Susan in Houston, TX who wants to know, “How long do I need to retain my back up tax documents that support my tax return?
Funny you should ask. A friend of mine was just telling me that she was finally clearing out old records and throwing out old tax returns – as if this were a good thing.
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I know this isn’t what you asked, but…never, never, ever throw out old tax returns. The minute you do – that’s when you’ll be called upon to produce them.
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But, the back up records? Keep all the records for at least 7 years after you file the tax return. And if there are any records in there about stocks or real estate you bought that you still own, copy those records and put them into a permanent file. Keep those records for at least 7 years after you sell those assets.
If you ever gave someone a gift of stock or property, keep the records until at least 7-10 years after the person you gave them to sells the asset.
Better yet, give them a copy of the purchase or basis details so they have them for their records.
If you have records relating to anything that you rolled over – into a tax-deferred exchange, or a ROTH-IRA, or any other kind of roll-over…keep those in a permanent file forever – or until at least 10 years after you finish cashing out your ROTH, or 10 years after you sell the roll-over assets without rolling them over any longer.
You see, if those transactions are ever audited some time in the future (for depreciable basis or tax-free basis or whatever), IRS will want to see the original documents that established the basis.
And remember, you’ll find answers to questions about record-keeping and all kinds of tax issues, free. Where? Where else? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting news about the IRS Exam. Please click on the subscribe link and join us.
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