Since we are nearing the end of the year, it’s a good time to think about what types of records need to be kept. Generally, tax records should be kept for 7 years. The list below can be used as a guide for the types of records that need to be kept:
Alimony—If you receive or pay alimony, you should keep a copy of your written separation agreement or divorce decree as well as the maintenance or support decree. If you pay alimony, you need to keep your former spouse’s Social Security number.
Home Business—If you have a home office or workshop, you should keep records that show the part of the home that is used for business and the expenses related to that use. If you elect to use the safe harbor method, the expense records don’t need to be kept.
Casualty Losses—If you experience a casualty loss, your records should show:
- The type of casualty (auto, fire, storm, etc) and the date of occurrance
- That the loss was a direct result of the casualty
- That the taxpayer was the owner of the property
Theft Losses—If you experience a theft loss, your records should show:
- When it was discovered that the taxpayer’s property was missing
- That the taxpayer’s property was stolen
- That the taxpayer was the owner of the property
Child Care Credit—Taxpayers must give the name, address, and taxpayer identification number for all people or organizations that provide care for their children or dependent. Form W-10 can be used to get the information from the provider.
Credit for the Elderly or Disabled—Taxpayers under the age of 65 must have their physician complete a statement certifying that they were permanently and totally disabled on the date they retired. Do not file this statement with your tax return but keep it with your records. If the Department of Veterans Affairs makes the certification, VA Form 21-0172 can be submitted in lieu of a physician’s statement.
Education Expenses—Transcripts and course descriptions that show periods of enrollment and canceled checks and receipts that verify amounts spent on tuition, books and other educational expenses should be kept with your tax records. Form 1098-T (received from the educational institution) should also be kept with your tax records.
Exemptions—If you are claiming an exemption for a qualifying relative under a multiple support agreement, you must get a signed statement from all other eligible individuals who could claim the exemption.
Health Care—It is the taxpayer’s responsibility to keep records of their health care coverage during the year for themselves and their family. This includes employer provided and private coverage. If you have private coverage, you need to keep records of the premium’s paid and the type of coverage you purchased. Taxpayers need to show that they maintained the required minimum essential coverage unless they are exempt. If you are exempt, you need to keep the certificate of exemption or other documentation. If you have a Health Savings Account or a Medical Savings Account, you must keep a record of the name and address of each person paid and the amount and date of the payment for each qualified medical expense that is paid for with a HSA or MSA disbursement.
Individual Retirement Arrangements (IRAs)—Taxpayers should keep copies of the following forms and records until all distributions are made from the IRA:
- Form 5498—shows contributions made, distributions received and the value of the taxpayer’s IRA
- Form 1099-R—for each year a distribution is received
- Form 8606—for each year a nondeductible IRA contribution is made or IRA distribution is received if the taxpayer ever made nondeductible contributions
Mortgage Interest—If you paid mortgage interest of $600 or more, you should receive Form 1098 from your mortgage company. Form 1098 and your mortgage statement and loan information should be retained.
Pensions and Annuities—Each worksheet used to figure the taxable part of any pension or annuity while preparing the tax return should be retained until the taxpayer’s contributions are fully recovered.
Taxes—Form W-2 and Form 1099-R show state income tax withheld from wages and pensions and copies should be retained to prove the amount of state withholding. Taxpayers who made estimated state income tax payments should keep a copy of the form or checks. Taxpayers also need to keep copies of their state income tax returns. If the state income taxes are refunded, the state may send them Form 1099-G and that should be kept as well.
Taxpayers should keep mortgage statements, tax assessments and other documents as records of any real estate and personal property taxes paid. If you deduct actual state and local general sales taxes instead of using the optional state sales tax tables, you must keep your actual receipts showing the general sales taxes you paid.
Tips—Taxpayers must keep a daily record to accurately report tips on their return. Form 4070A can be used to record tips.
IRS information about record keeping for small businesses can be read here.