Keeping the Right Tax Records

It won't be long before you once again are leafing through receipts and filling out those tedious tax forms for 2002. If there is one thing that can create a paper blizzard at your house, it is the mound of paperwork associated with filing your tax returns.

While it may be tempting to get much of that paperwork out of your way, it is also important to maintain appropriate files for your records. Here are some suggestions on what to keep:

• A general guideline is to hold on to your tax records, including the returns you filed and any supporting documents, for at least three years from the deadline filing date. In other words, as of late 2002, you should still have files of your records for 2001, 2000 and 1999. Three tax years is the time period in which the IRS can still look back and study your returns for accuracy.
  
  
• It may make sense to hold on to complete tax records dating back at least six years or more. The period of limitations on any possible unreported income is six years after you filed a return, so you should be prepared just in case.
  
  
• It is important to note that the IRS can actually pursue you for back taxes and penalties beyond the six-year time period, if you knowingly filed a false report or failed to file your return. You may wish to keep tax records beyond six years as they can be useful in calculating items like your tax basis and stocks with dividend investment features.

Content is for informational purposes only and may not accurately reflect your specific situation. Information is not intended to provide financial, legal, tax, or accounting advice. You should consult a qualified advisor for advice specific to your own circumstances.