Which Tax Records to Keep
How many years do I need to keep tax records, such as old receipts? I have tax returns but would like to clean out old records dating to 1992.
This is the perfect time of year to do some housecleaning with your financial records. You should be receiving your W-2 and 1099 forms this month, reporting your income and interest for 2007. In the meantime, you can start to get rid of many of your old tax records.
It's a good idea to keep your tax returns forever. But you can usually toss the supporting documents, such as canceled checks and old receipts, three years after you filed your taxes.
That's usually how long the IRS has to audit your return, unless you've left out a big chunk of income. If you have any self-employed income, keep the receipts for at least six years.
Keep receipts for major home improvements until you sell the house. You may want to show potential buyers how much you've spent, and you can use certain home-improvement expenses to lower any tax bill you might have on your home-sale profits. (You generally won't be taxed when you sell your house, unless you have lived in it for less than two years, if you rented out part of it, or if you sold it for more than $250,000 in profit if single or $500,000 if married). For more information, see Taxes and Home-Sale Profits and Finding Your Home's Tax Basis.
It's also a good time of year to get rid of some other records. You generally can toss your monthly investment statements when your year-end statements arrive, as long as everything matches up with the year-end report.
You should, however, keep records showing what you originally paid for mutual funds and stocks until you sell them. You'll need the information when you report the gain or loss on your taxes.
Also hold on to year-end statements showing how much you received in dividends or capital-gains distributions, so you won't end up paying taxes on them twice if you reinvest that money.
And keep any Form 8606 tax records reporting nondeductible traditional IRA contributions, so you won't end up overpaying your tax bill when you start to take out the money in retirement See Keep Only Key Retirement Account Forms for more information.
For more information about preparing to file your 2007 taxes, see the Kiplinger Tax Center.
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