Here comes April 15, and you know what that means.
Even if you already have filed your taxes, there still may be some matters that need attention.For example, how long should you keep your tax records?
Normally, the Internal Revenue Service has three years from the time your return is due or filed - whichever is later - to challenge items, said Charles Clark, a partner with the accounting firm Peat Mar-wick.
Returns and any supporting documentation ought to be saved for at least three years, along with W-2s, interest statements and proof of deductible items such as medical bills and local tax payments.
Other guidelines for holding on to documnnts:
- If the IRS can show that your gross income was understated by more than 25 percent, the statute of limitations is extended to six years. So you should keep records for at least that long if your return has large, questionable items.
- "If the IRS suspects fraud on your return, there is no statute of limitations - your return can be challenged at any time in the future," Clark said.
- Keep records pertaining to major investments for at least three years after the sale of the asset involved.
- Some records probably should be kept indefinitely. This includes actual tax returns and records that pertain to estate matters.
- Save Forms 8606, which document non-deductible contributions to Individual Retirement Accounts.
A good general rule on tax records is, "when in doubt don't throw it out."
Clark said many taxpayers believe that filing later than April 15, via an extension, will increase the odds of being audited. "The truth is, the IRS will not hold it against you if you file an extension," he said.