Authored by CST Group Partner, Mark Watts
Congratulations – your taxes are filed! Now that your tax return is completed, you may be turning your attention toward spring cleaning – wondering which documents you can toss and which you need to keep. Even if you’ve filed your taxes electronically (and, according to IRS Data, nearly 83% of all taxpayers do), you still need to retain and organize hard copies of certain documents.
How long should you keep tax records? Once you collect and organize the documents you need to retain, it’s important to keep them for 3-7 years, which covers the length of time the IRS is allowed for an audit.
The Virginia Society of CPAs has two excellent record retention guides for both businesses and individuals: Record Retention for Small Businesses and Your Financial Records: Making Order out of Chaos.
Why is proper tax record retention so important? All IRS audits begin with an Information Document Request (IDR). Simply providing the appropriate documentation to support your tax deductions is the first step of the audit, and if you can back up your deductions with the correct paperwork, the process is more likely to proceed smoothly. Without the proper documentation, or without speedy access to it, the audit will become more arduous and complex, and your deductions may be disallowed.
If you have any questions about record retention, please contact us to speak to a tax professional.
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