Document Retention Keeps Uncle Sam at Bay

Before you take off for summer vacation, have you checked in with your CPA?Mid-year is a good time to review records and receipts for the upcoming tax season in order to take advantage of any credits, incentives or deductions that will help you for 2011.It is also important to keep your records in order and archived. In Minnesota, the general time limit for the Department of Revenue to examine a past return is 3-1/2 years. It is similar at the federal level, but there are several exceptions to that rule.Here are general guidelines for retaining documents for tax purposes to ensure that you can prove the validity of past income and deductions if necessary.Keep For Six to Seven Years:

• Tax returns and backup documentation for both income and deductions.
• Mutual fund and brokerage year-end statements
• Cancelled checks and receipts or acknowledgements to support deductions.

Keep For One Year:

• Monthly bank records, brokerage statements, pay stubs
• Form W-2s, 1099s or other official tax reporting forms.
• Verify that your monthly activity agrees with amounts on those forms.

Keep in Paper or Electronic Form Indefinitely:

• Property documents (and until at least three years after a sale or disposition)
• Employer retirement plan documents (even if you no longer work for the company)
• IRA contribution records for any accounts that include “after-tax” amounts
• Purchase records for stocks, mutual funds or any other securities
• Documentation of the purchase price and major improvements for your home and any other real estate
• Documentation (and possibly photography) for items such as jewelry, antiques or collectibles for tax and insurance purposes.

If you have any questions about which documents to retain and for how long, contact HG&K. We can also advise you on tax and estate planning strategies for the remainder of 2011.