Tax season isn’t too far off, which means that the year of keeping records of taxes is almost here. If you’re a master record keeper, chances are good that you have your financial information going back a few years, maybe a decade or more. If you’re at a point where your records are overwhelming you, it’s time to prune them. You can do this without worrying about having an unexpected audit pop up as there are limits on how long the IRS has to audit your back taxes.
Records should be kept for up to 10 years even though the threat of an audit passes after three. If the IRS has a suspicion that your income was underreported by at least 25 percent, it can go back six years into your finances. It’s because of this reason that it’s best to keep financial documents for a decade.
Hold onto records that support income, deduction, credits and any other tax-deductible expenses. Make sure you have accurate records of your home in the event you sell it. You can avoid paying capital gains on profit up to $250,000 for singles and $500,000 for married couples. In the event you have stock transactions, make sure to hang onto detailed and clear records in order to demonstrate where the money goes to.
Are you in the greater Phoenix area and needing help with your taxes? Contact Phocus Companies today to schedule an appointment!
