How long should you keep tax records?
Federal laws specify how long you must retain the documentation to support the filing of income tax returns. For most taxpayers, this period is three years from the original due date of the return or the date the return is filed, whichever is later. For instance, if you filed your 2006 Form 1040 April 17, 2007 or sooner, the IRS has until April 17, 2010, to audit the return and assess a deficiency if necessary.
The statute of limitations period extends to six years if a return includes a substantial understatement of income (defined as omitting income greater than 25% of the amount reported on the return). There is no statute of limitations if a taxpayer fails to file a tax return or commits fraud. A taxpayer is considered to have committed fraud if he/she submits a false return or if there is a willful attempt to evade tax.
If a required return is not filed, the records must be kept forever, as the statute of limitations does not begin until the form is filed. Failure to keep adequate records is a separate violation from failing to pay or to file.
And of course anything in a return that may be required to prove a position in a future return, should be kept as support for that position. For example, basis calculations that effect an ongoing holding, amortization of mortgage points etc.
There may be non-tax reasons to retain these records. If you are unsure you should contact a financial advisor and/or tax specialist.
For more information: IRS article
How long should I keep bank statements?
Keeping bank statements for at least one year is a good idea but if you want to be absolutely prepared in case the IRS ever comes knocking, be on the safe side and keep them for 3 years. You might need two or more years of bank statements if you plan to buy a home and need to apply for a mortgage. Keep bank statements and canceled checks that reflect major purchases, such as a diamond ring, for as long as you own the property.
How long should I keep my personal bills?
There is no need to keep monthly bills, however, it is wise to keep bills until the next month to prove balance, purchases, credits, etc. As a realtor, our sellers are often asked to provide the last year's utility bills to prospective purchasers. This enables the purchaser to get an idea of energy costs of the home they are considering putting an offer on. So if you are thinking about selling your home in the near future, you may want to save your electric, gas and water bills just in case.
Call Listing Agent, Mark Adams, at 804-237-8585 for more information, visit us on the web at www.markadamsteam.com or