Recordkeeping Guideines


April 7 2016

Complete, organized financial records can really simplify tax time. And keeping those records as long as you may need them can prevent future stress. Here are a few suggestions on maintenance time frames:

Three to seven years. The IRS has three years to audit a return, and you have three years to amend one. So at a bare minimum, keep your federal tax returns and supporting documents three years. But it’s best to keep this information seven years since the IRS has six years to start legal proceedings if they suspect anything more than a “good-faith error.” (The statute of limitations on a fraudulent return never expires.) A minimum of six years is recommended for self-employed taxpayers. If you claim a deduction for a bad debt or security losses, keep your documentation at least seven years. Be sure to include W-2s, 1099s, tax schedules, related bills, receipts, mileage logs, cancelled checks and proof of health care insurance. You should also keep documents for IRA distributions for seven years after the account is closed.

Four years. If you have any employees, including household help, keep employment tax records a minimum of four years after the tax is due or is paid, whichever is later.

Indefinitely. It’s actually a good idea to hold onto tax returns beyond these minimum periods since lenders and insurance companies may require them to verify income and asset value. They can also come in handy if you ever need to correct your earnings history with Social Security. Hold onto Form 8606 reporting nondeductible contributions to a traditional IRA to avoid paying tax again when you withdraw funds. And keep records of the dates you purchased stocks and mutual funds in taxable accounts and what you paid for them. You’ll need this information to determine gains or losses for taxes when you sell them. For the same reason, document the value of inherited investments at the time you received them.

If you prefer to keep electronic files, make sure they’re organized, clear and backed up. Always shred unwanted tax documents to protect sensitive information from identity thieves.

If you’d like to explore strategies to minimize your tax burden, we are happy to facilitate a joint meeting with your tax advisor. Just give us your CPA’s name, and we’ll find a time to accommodate everyone’s schedules. Call Jordan Dechtman, your Denver financial planner at 303-741-9772, email him at or visit our website to schedule an appointment.