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    Categories: Audits and Tax NoticesIRS

Tax Dictionary – Tax Records

IRS Definition

Well-organized records make it easier to prepare a tax return and help provide answers if your return is selected for examination or if you receive an IRS notice.

You must keep records, such as receipts, canceled checks, and other documents that support an item of income, a deduction, or a credit appearing on a return as long as they may become material in the administration of any provision of the Internal Revenue Code, which generally will be until the period of limitations expires for that return:

3 years – For assessment of tax you owe, this period is generally 3 years from the date you filed the return. Returns filed before the due date are treated as filed on the due date.

No limit – There’s no period of limitations to assess tax when you file a fraudulent return or when you don’t file a return.

6 years – If you don’t report income that you should have reported, and it’s more than 25% of the gross income shown on the return, the time to assess tax is 6 years from the date you filed the return.

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The types of documents you should keep with your tax records include: IRS Forms W-2, 1099 (1099-MISC, 1099-R, 1099-INT, 1099-DIV, 1099-S, 1099-B, 1099-SA etc.), 1098, and receipts for itemized deductions such as charitable contributions, medical expenses, property tax, etc. Keep receipts for health savings account expenditures and college savings accounts withdrawals. Also keep records of tax-deductible retirement savings contributions and Form 1095 to show you had eligible health insurance or proof that you met one of the exemptions.

If you have a business, you should keep records of all income and any business expenses you claim on your tax return
such as equipment purchases, travel expenses, advertising, office supplies, inventory purchased, etc.

If you purchase a home or buy stock or other property for investment purposes, you should hold on to all records regarding the purchase and any upgrades to a property for at least three years after you sell the stock or property.

You can obtain copies of documents such as IRS Form W-2, 1099, etc. from the IRS. Learn more about IRS transcripts and researching your IRS account.

Or, learn how to handle an IRS audit.

Elyce Harmon :