As the 2024 tax season comes to a close, you may be tempted to throw away your records. However, what documents are safe to shred, and which ones should you keep around in case you're audited?
Why keep tax documents?
To protect yourself from the IRS when they request an audit and to help you prove the tax basis of assets you'll sell in the future.
Keep your return: indefinitely
Although the IRS will only go back three years for suspected fraud or an understatement of income, having tax returns on hand creates history you can reference in case of an audit.
Most banks and credit card companies keep records online. Maintain access to these records, even if you switch banks or pay off loans.
If the IRS feels you have omitted more than 25% of your income, they will do an audit of six years. If you forget to file a return, the IRS can assess tax at any time. If the IRS claimed to never receive a return, keeping the signed copy on hand is amazing way to defend yourself against investigation.
Real Estate related and investment records
Keep real estate and investment related documents until six years after selling the investment or property. This includes stocks or shares in a mutual fund. A good thing to remember is if you reinvest dividends to buy additional shares, each investment is viewed as a separate purchase.
In event of divorce, duplicate your records
Although taxes are the first thing on your mind after divorce, you are still liable for any joint taxes you filed with your former spouse. You'll also want to keep any documents that specify who is entitled to claim them as a dependent.
Protect your records from loss
To safeguard documents against theft, disaster, or fire invest in a mix of digital and physical storage solutions. Contact us with questions about thoughtful secure ways keep your records safe.
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Securities offered through Valmark Securities, Inc. Member FINRA, SIPC. Fee based planning offered through SDM Advisors, LLC. Third party money management offered through Valmark Advisers, Inc a SEC registered investment advisor. 130 Springside Drive, Suite 300, Akron, Ohio 44333-2431. 1-800-765-5201. SDM Advisors, LLC is a separate entity from Valmark Securities Inc. and Valmark Advisers, Inc. Form CRS Link
DISCLAIMER:
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. The services of an appropriate professional should be sought regarding your individual situation.
HYPOTHETICAL DISCLOSURE:
The examples given are hypothetical and for illustrative purposes only.
