Record Keeping for Individuals

Why Keep Records?
 
There are many reasons that you may keep records. The top reasons include tax purposes, insurance, and for getting a loan. Good record keeping will also help you:
 

• Identify sources of income
• Keep track of expenses
• Keep track of the basis of property
• Prepare tax returns
• Support any and all items reported on tax returns.

Kinds of Records to Keep
 
The IRS does not tell you how to keep your records, or that you need to keep them in a particular way. What’s important is that you have the records. Keeping your records in a way that allows you, and the IRS if necessary, to determine your correct tax is what is important. 
 
Basic Records
 
EVERYONE should keep basic records. These are the records that prove your income and expenses.
 
For items concerning…
What should be kept       
 
Income

• W-2s
• 1099s
• Bank Statements
• Brokerage Statements
• K-1s

Expenses

• Sales slips
• Invoices
• Receipts
• Canceled Checks
• Charitable Contributions

Home

• Closing Statements
• Purchase and Sales Invoices
• Proof of Payment
• Insurance Records
• Improvement Costs

Investments

• Brokerage Statements
• Mutual Fund Statements
• 1099 Forms
• 2439 Forms

 
Proof of Payment
 
One of your basic records is proof of payment. Proof of payment alone is not proof that the item claimed on your return is allowable. You should also keep other documents to help prove your case.
 
Generally, you prove payment with a cash receipt, financial account statement, credit card statement, or canceled check.
 
If payment is by…
 
Then the statement must show…
Cash

• Amount
• Payee’s name
• Transaction Date

Check

• Check Number
• Amount
• Payee’s Name
• Date the Check Amount was Posted

Debit or Credit Card

• Amount Charged
• Payee’s Name
• Transaction Date

Electronic Funds Transfer

• Amount Transferred
• Payee’s Name
• Date the Transaction was Posted

Payroll Deduction

• Amount
• Payee Code
• Transaction Date

 
Specific Records
 
Listed below (alphabetically) are examples of items that may require specific records in addition to your basic records.
 

• Alimony
• Business Use of Your Home
• Casualty and Theft Losses
• Child Care Credit
• Contributions
• Health Savings Accounts (HSA) and Medical Savings Accounts (MSA)
• Individual Retirement Arrangements (IRA)
• Medical and Dental Expenses
• Education Expenses
• Exemptions
• Employee Business Expense
• Energy Incentives
• Gambling Winnings and Losses
• Mortgage Interest
• Moving Expenses
• Pensions and Annuities
• Taxes
• Sales Tax on Vehicle
• Tips

 
How Long To Keep Records
 
You should keep records that support items shown on your return until the period of limitations for that return runs out.  The period of limitation is the amount of time that you can amend your return to claim a credit or refund or the IRS can assess additional tax.  Refer to the table below that shows the period of time that applies to income tax returns. The years refer to the period of time AFTER the return was filed. Returns that are filed before the due date are considered to be filed on the due date.
 
If you…
Then the period is…
 
1. Owe additional tax and (2), (3), and (4) do not apply to you.
3 years
2. Do not report income that you should and it is more than 25% of your gross income shown on your return.
6 years
3. File a fraudulent return.
 
No Limit
4. Do not file a return.
 
No Limit
5. File a claim for credit or refund after you file your return.
 
The later of 3 years or 2 years after the tax was paid
6. File a claim for a loss from worthless securities.
7 years
 
If you have any questions about record keeping, or any other tax related matter. Please contact us at help@globalatg.com or call 412-904-2693.
 
For a more complete overview of record keeping requirements, please visit www.irs.gov or IRS Publication 552.