Good recordkeeping will save you time when preparing your taxes. Also, if the IRS has any questions, your well-kept records will help you explain your return.
It's a good idea to keep your records in order by date and category. Organizing your receipts, pay stubs, and various financial forms during the year will make it easier to get the numbers you need when you file your return.
You can find software programs designed to help you maintain records. However, you still should hold on to original receipts and tax forms. It's a good idea to use a folder, envelope, or binder to keep all your records for the tax year together. You should store those annual files for later reference.
The IRS requires you to keep your records a minimum of 3 years, but we recommend a minimum of 7 years. Though you might not need these records for tax purposes, you might maintain them for proof to creditors or for use in insurance claims. The IRS recommends you keep your W-2 copies until you're eligible for retirement in case there's a discrepancy.
Records you should keep include:
General financial documents - You should keep:
Records of tips earned
Receipts for big-ticket items, like the purchase or sale of vehicle or home
Records of investments and contributions to retirement accounts
Bank and brokerage statements
Receipts for deductible items - When making payments toward a deductible item by credit card, electronic funds transfer, or check, you should record the:
Date of transaction
If you make a payment in cash, you should get a signed and dated receipt showing the amount and reason for the payment.
Insurance and medical records - Keep papers regarding insurance claims and medical expenses. These papers should include dates and details of what was paid for and when.
Theft or loss documentation - For a theft or loss, document:
Value of lost or stolen property
Date you first noticed the property missing
Proof it was yours
You should also keep insurance or appraisal information and police reports.
Gambling records - Follow these IRS guidelines to prove gambling winnings and losses:
Keep an accurate diary or similar record you regularly maintain. The diary should contain this information:
Date and type of specific wager or wagering activity
Name of gambling establishment
Address or location of gambling establishment
Name(s) of person(s) with you at the gambling establishment
Amount won or lost
Keep verifiable documentation, which includes:
Statements of winnings or payment slips the gambling establishment provides
When possible, keep documents to support the placement and settlement of a wager, including:
Gasoline credit cards
Affidavits or testimony from responsible gambling officials about your wagering activity
Charitable records - For every cash donation you make, regardless of the amount, you must keep a record of the donation. The IRS will accept as proof of your donation:
Canceled check or bank copy of check
Written communication from the charity showing the:
However, for cash donations of $250 or more, the charity also must give you a written acknowledgment of the donation.
For property (noncash donations), you'll need a receipt from the charitable organization showing the:
Date and location of donation
Description of donated item
For donations with a fair market value of $250 or more:
You’ll also need written acknowledgement of the donation.
You might need an appraisal, depending on the value and condition of the property.
Also, track your out-of-pocket expenses for charitable work you do. Keep records of your:
Bus and taxi fares
For each item, write down the:
Date of expense
Self-employment records - If you're self-employed or use your home for business, you'll need to keep detailed records of your expenses and income.
To learn more, see IRS Publication 334: Tax Guide for Small Business.