"Your tax data is helpful and often required in many non-tax
financial situations," says TaxACT representative Jessi Dolmage.
"For instance, insurance companies, lenders and creditors often use
tax information to verify income and asset value. Form W-2s can
provide proof of income if your Social Security benefits are less
than what they should be."
Information to save for your next
Organizing and saving information throughout the year will cut
tax return preparation time and can even save you money. Save any
information related to:
Income from wages,
dividends, interest or business: Forms W-2, 1099 and K-1, bank
statements, brokerage statements.
credits (for child care expenses, medical and dental expenses,
business use of home, charitable gifts, vehicle sales tax,
alimony): Receipts, invoices, mileage logs, bank or credit card
statements, canceled checks.
Home and property:
Closing statements, invoices, proof of payment, insurance
records, receipts for improvements.
Investments: Forms 1099 and 2439,
brokerage statements, mutual fund statements.
While you don't need a fancy or high-tech organizing system, you
do need to keep the information in a secure place. Consider saving
electronic copies to the cloud or on a backup storage device in
addition to, or in place of, your paper files.
One of the key advantages of going digital is that your tax
information is better protected from natural disasters," says
Dolmage. "Saving electronically also means you can access the
information anywhere from a mobile device."
Apps and websites make digitizing documents easy. TaxACT DocVault
is a free mobile app and website specifically designed to create and
save secure, digital copies of tax documents. At tax time, import
DocVault images into TaxACT Deluxe to save with your return.
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What to keep after filing your taxes and how long to keep it
Knowing what information to save and for how long can be
confusing. As a general rule of thumb, keep tax returns and related
documents for at least three years from the April 15 filing
Three years: Tax
return forms and schedules plus all information to support what
you claimed on your return, especially records related to
property, investments or business assets (for depreciation).
While there are exceptions, the IRS has three years to assess
additional tax and audit returns. Three years is also the amount
of time you have to amend your return.
Four years: Many
income-taxing states have an additional year to audit individual
Six years: Forms
W-2, 1099, etc. because the IRS has six years to contact you if
you've failed to report income.
Seven years: Any information regarding
loss from worthless securities or bad debts.
Certain documents should be saved longer.
"Information related to your home, property, investments and
retirement plans should be kept indefinitely," says Dolmage. "If you
dispose of an asset, be sure to keep the information for another
Business owners should keep tax information for at least four
years. That includes employment records, gross receipts, invoices,
bank statements, proofs of purchase, asset records, databases,
emails and even voice mails.
Refer to IRS Publication 552 at
www.irs.gov for more information about tax record keeping.
Publications 583 and 463 provide specific information for
www.taxact.com/apps to download TaxACT DocVault for free.