— By KATHY SMITH
You may be starting to collect your documents that you need for filing your 2013 taxes. You may have found that you have tax records and other information for many years. You may wonder how long do I need to keep all of these records.
Officially, the Internal Revenue Service has three years to audit federal income tax returns, but there are exceptions. The agency gives itself six years after a return was filed to audit in unusual cases — for example, if additional income comes to light, and the amount is more than 25 percent of the income shown on the return.
In addition, if the IRS determines a return was false or fraudulent, an audit can occur at any time — there is no time limit.
Even as you purge your old files, you might want to keep some of the records that you have with your tax returns. For example, you may want to hang onto your W-2 forms, which show your annual income and the taxes withheld from your paycheck.
These could be important at some point, such as when you file for Social Security or other benefits, in case there’s some type of discrepancy about your work history.
In addition, if you’ve kept records pertaining to buying or refinancing property or making major home improvements with your taxes, pull those before you start shredding. They could be useful if you sell your property in the future and need to establish capital gains or losses.
In keeping tax returns and information here are the recommendations from the IRS:
• You owe additional tax and situations 2, 3, and 4, below do not apply to you: keep records for three years.
• You do not report income that you should report and it is more than 25 percent of the gross income shown on your record; keep records for six years.
• You file a fraudulent return; keep records indefinitely.
• You do not file a return; keep records indefinitely.
• You file a claim for credit or refund after you file your return; keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.
• You file a claim for a lost from worthless securities or bad debt deductions; keep records for 7 years.
• Keep all employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.
• Keep records relating to property until the period of limitation expires for the year in which you dispose of the property in a taxable disposition. You must keep these records to figure any depreciation, amortization or depletion deduction and to figure the gain or losses when you sell or otherwise dispose of the property.
When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes.
For example, your insurance company or creditors may require you to keep them longer than the IRS does.
While you’re going through the files, you might want to go on the attack on other paperwork you may no longer need for record keeping tips and helpful information.
There is a record keeping guide at http://parker.agrilife.org/files/2014/01/Household-Record-Keeping-Tips.pdf or for a hard copy call 817-598-6168. Also there is good information on record keeping at http://publications.usa.gov/epublications/keeprecords/keeprecords.htm.
• Warranties. Keep these records, especially for big-ticket items such as vehicles and major appliances, for as long as you own the item in question.
• Records that are not easily replaceable, such as military service records, Social Security cards, birth and marriage certificates, property titles, and household inventories. These should be kept someplace safe — in a fire-, water- and burglar-proof safe, for example – or in a safety deposit box.
Keep record-keeping as simple as possible. Some people like to keep records in file folders (if you file your records alphabetically, they’re easy to find). Other people like to keep a box for warranty information, another for tax records and another for bank statements. Whatever works for you is the best option.
Source: Ohio State Cooperative Extension and IRS.